Like Cheap(er) Gas? OPEC Doesn't.

Justin Berkowitz
by Justin Berkowitz
like cheap er gas opec doesn t

I’ll bet most folks are happy about their $2.99 gas. They might even like it enough that they forget that back in 2000 it was only $1.00 a gallon. Despite my continuing belief that the price of a gallon of regular in the U.S. is going to shake out between $5 and $10 in the next five years, the world of analysts and short-term economists seem to be of the mindset that lower fuel prices are at least semi-permanent. And that makes OPEC very nervous. Lower demand makes lower prices, that makes lower profits, and the result of that is fewer shiny exotic cars. The New York Times reports today that OPEC is working on strategies to put their monopolistic cartel to work for the good of the world their profits. While they would like to cut production levels, the problem (and this is always the problem with cartels) is the risk of cheating. If everyone else cuts production and prices go up, an individual member has an incentive to produce and sell more. Considering that many of the OPEC member states (and oil producing non-member states like Russia) depend on oil to balance their budgets, it’s hammer time for oil countries. Or, as the terrorist nation Iran’s oil minister said, “The era of cheap oil is finished.”

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4 of 17 comments
  • Psarhjinian Psarhjinian on Oct 23, 2008
    Gas is expensive in Europe because the governments over there tax the living crap out of it, not because it has to be that way. In Europe and Canada they tax. In the US they toll. You pay more or less the same, but you don't notice it in the US because they take it out of you a nickel-and-dime at a time. Either that, or they just don't fix the roads. Driven through Michigan recently?
  • 1996MEdition 1996MEdition on Oct 23, 2008

    Guys like Hugo Chavez are sweating because they maintain their power with petro dollars. Gas here in Indiana is down under $2.40 in places. That, combined with recently moving and cutting my commute in half, is adding to my savings. It's nice not even being able to spend $30 filling my car unless I spill it on the ground.

  • Psarhjinian Psarhjinian on Oct 23, 2008
    Guys like Hugo Chavez are sweating because they maintain their power with petro dollars. So does Steven Harper.
  • Dean Dean on Oct 23, 2008

    I can't see oil prices dropping much further. It is getting close to the break-even point for all the oil sands producers in Alberta, so much lower and they will start to curtail production until the price stabilizes.