Word: opec
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Prices break, and OPEC scrambles to keep them from going into a free fall...
From Europe to the Middle East, harried members of the Organization of Petroleum Exporting Countries huddled through the week. The structure of bloated oil prices that OPEC had erected over the past decade, condemning rich and poor nations alike to recurrent bouts of inflation and stagnation, was shaking wildly. Prices had broken and were threatening to go into a free fall...
...prevent that from happening, the oil ministers of Saudi Arabia and several of its oil-rich Persian Gulf neighbors agreed to lower the official OPEC price by an undisclosed amount. The gulf nations were hoping to whip the other OPEC members into accepting the new price floor at a meeting this week. Failure to do so, the Arabs seemed to sense, could mean the end of OPEC. Said a senior OPEC official: "The war begins. It is very dangerous...
Since late 1973, when OPEC jacked up its charge for a barrel of oil from $3.07 to $11.65, crude prices have moved mostly in one direction: up. The big question, especially after the 1979 Iranian revolution ignited a wave of increases that pushed the official price from about $13 to $34, was: How high would the price go? Now the question is: How far will it drop? The answer, as ever, is: Nobody knows...
Much of the support for the tax stems from a fear that OPEC will reunite, ratchet oil prices back up, an deliver yet another stunning oil shock to the economy. This fear is wholly unfounded. If OPEC were really in control of the oil market, it could just reduce production to keep prices up. OPEC cannot do this, because it now controls only 43 percent of the West's oil supply, as opposed to 60 percent in 1979. OPEC's coherence derived from Saudi Arabia's ability to unilaterally set the price of oil; in the past two years...