Yeah, Boyo Jim, a cartel is for controlling an area of the market. Price and competition. What you are hypothesizing is that maybe OPEC isn’t simply a cartel but a broader political alliance with secretive goals. Possible but if they aren’t coordinating to control price and/or fuck with competitors then they aren’t a cartel in a meaningful sense.
By the way, getting back to the original point of the thread, here’s some positive economic results from the lower oil prices.
Big SUVs Fuel U.S. Auto Production Boom
[QUOTE=WSJ]
Light-vehicle sales are on track to hit a record in 2015, and an increasing bulk of those units are hulking highly-profitable models like the Chevrolet Suburbans, Tahoes, Cadillac Escalades and GMC Yukons that roll off an Arlington assembly line running six days a week, building 16.5% more vehicles through the first 11 months in 2015 than in the same period a year ago. GM posted record profit in the third quarter; with its SUV plant—one of the most profitable auto factories in the world—contributing much of the earnings.
[/QUOTE]
[QUOTE=WSJ]
Mr. Bergstrom emphasized the role the pump price plays in the industry’s boom. “People underestimate the importance…the price of gasoline is huge.” He estimated Wisconsinites have an extra $250 to spend each month from cheaper gasoline.
[/QUOTE]
No. Real wages have declined about 5% since about 2009. It is even worse for low paying jobs. New jobs are disproportionately low wage. Real unemployment is at least 10%. Home ownership is down about 4% since the crisis. Rents are through the roof. Young people are struggling under huge student debts and find it hard to become economically independent and start families. It is bad. The real economy is dead in the water.
I understand (I think) that this strategy will work in the short term, but only so long as oil prices stay low.
But once oil starts to go up again, and crosses whatever the threshold is for making oil extraction economically viable, non-OPEC extraction should start again. So, all that the current low prices are doing is delaying non-OPEC extraction. And, for the sake of that delay, OPEC producers are costing themselves a bundle.
Naively, then, ISTM that either oil prices stay low ‘forever’ or non-OPEC extraction starts booming again. In both cases, OPEC producers lose, no?
OPEC isn’t just not behaving like a cartel, it is falling apart. Saudia Arabia and Iran, two of the biggest members (and certainly the biggest players in the ME, if you don’t count the Colonial powers) have recently cut diplomatic ties with each other. Iranians burned down their Saudi embassy. Some of Saudi Arabia’s allies in the region are lining up behind them against Iran. These two aren’t coordinating any oil schemes together anytime soon.
This has been brewing for some time. Iraq and Syria are falling apart, and Saudi Arabia and Iran are vying for influence. Saudi Arabia has the upper hand because of their petro power (and relations with the US- they haven’t been under sanctions for years)- they can pump like mad, keep prices low and thereby weaken Iran. In the long run oil prices will have to rise again, but by then the Saudis will, they hope (I speculate), have more effectively dominated the ME.
Uh-oh. Looks like we forgot about China. 
Clears throat.
A big part of this decline has been the slow down in China and the strong U.S. dollar. It isn’t all U.S. shale and OPEC action/inaction.
Also clears throat…
eta: though that should probably be an AND/OR or MOSTLY
With the crash of the oil market and OPECs claims do the posters in this thread still maintain that OPEC is powerless?
While low oil prices hurts some of the US economy, it hurts the Saudi economy far more. With Iran being able to sell oil soon it will get worse for them. Anyhow, the Saudis are behind this, not OPEC, who for the most part are suffering. (boohoo)
Well, OPEC is like Animal Farm and of course Saudi is the most equal. The smaller OPEC countries are begging for meeting but it won’t happen if the Saudis don’t want it to and this price drop is a deliberate action.
This is an OPEC oil war, and I still say that they are winning at this point.
On their own they’re powerless. The problem OPEC had is that they propped up prices by cutting OPEC production and everyone else got the same price benefit without cutting their own production. What they’re doing now is acting exactly as they would if the cartel didn’t exist. Turns out that in the absence of an OPEC cartel a lot of other producers suffer quite a lot. I don’t know if it’s fair to say that this means that OPEC has power.
The best case scenario for OPEC is if others, most notably Russia, effectively join OPEC in cutting production. (Oman just reiterated an offer to jointly cut production with OPEC.) If that happens, then they will effectively have a super-cartel including OPEC and others, which would control more of the world’s oil and have more power.
Just seems like everyone expects Saudi Arabia to cut production to prop up the price for everyone else’s benefit, therefore it is “their fault”. Sounds like bullshit.
They seem quite capable of holding the worlds prices low by not cutting production, which is their current, publicly stated goal.
That’s called supply and demand. Every major company in the world is doing the same thing.
Apple is holding the price of smartphones low by stubbornly refusing to cut production of their i-phones and insisting on cranking out as many as they can. And so on.
The only difference in the case of OPEC is that when they produced a lot more of the world’s oil than they do now, they made a strategic decision to act as a cartel and artificially prop up prices. What they’re doing now is more like the normal course of events.
Again, the question here is whether OPEC is “powerless”. The ability to not act as a cartel and let price fluctuate based on supply and demand is not power. The ability to manipulate prices in your favor is “power”. And at this time there are enough other sources of oil such that OPEC is “powerless” to keep prices up where they would like them to be.
Interest rates and storage costs. Don’t forget storage costs, which can be significant.
In a competitive economy, that is what is supposed to happen, right? Prices gravitate towards production cost plus a profit commensurate with the risk taken, right?
Spot on!
Did not verify the numbers or percentages however you make the most valid point in this discussion. We have left future generations to come in horrific shape.
Many folks on here will just skim over your comment because their little world is just fine.
I said it before and I’ll say it again, the student loan bubble will be the next one to go
Of course they are capable of it, but this is cutting into their cash reserves, so on purely economic terms it hurts them. It is quite likely that a small decrease in production would cause a major swing in prices, which would more than make up for it. Before Iran that is, which might change things.
Since they aren’t stupid, they are clearly doing it for long term economic advantage or short term political advantage.
Is this part so bad? One of the causes of the crisis was that too many people owned homes they couldn’t actually afford.