I’m not sure what you think that cite demonstrates. All it is is an OPEC spokesman trying to convince the world that OPEC could still significantly increase production (which is almost certainly false) to keep the futures market on its toes. “Oh we could increase production if we wanted to, but it wouldn’t actually change the price.” :dubious: He’s spooning out bullshit, is what he’s doing.
Here’s the thing (or at least one of them) that you are failing to grasp. When you have maxed out the supply of something and the demand for that item still outstrips the supply, the price will rise until demand drops to the level of supply, and the demand will drop via people who want the good being priced out of the market.
Here’s an analogy. EVE Online is a scifi mmorpg where player characters fly about in spaceships and blow each other up. The in-game market is largely unregulated - items can be bought and sold through the market at any price two players can agree on. Most items in the game can be made by anyone (with varying degrees of efficiency), and so when prices edge up due to increased demand, supply will quickly grow to meet it. However, a while back there were some advanced items which could only be made by specific players that had won a lottery granting them licenses to build certain things (a bit more complicated than that, but the details don’t matter). This system worked okay for a while, but as time went on and the player base in the game grew, demand for these advanced items grew whilst supply remained fixed. Heavy Assault Cruisers were the most blatant case - they cost about 40 million ISK to build, and were selling for upwards of 250 million ISK. Regular production is doing good to have a 10-15% margin, but these guys had margins at 500% and more. The game forums featured thread after thread moaning about how the HAC builders were gouging and were obviously forming cartels to fix prices and on and on. Really it was just a fixed cap on supply, and growing demand. And as demand grew, the price went up, and up, and up, because to balance supply and demand you had to push the price up to the point where only a small portion of those who wanted a HAC could afford one. The builders weren’t fixing prices at all - in fact, if they’d sold their product on the market at a modest markup it would have been purchased in an instant by someone who would just turn around and sell it at the going rate anyways.
So it is with oil. Ordinarily when prices increase, production increases along with it as anyone who can would like to cash in on the potential profit. But even with historic prices for oil, the supply isn’t growing. If you were right that current pricing is due solely to speculation, supply would be growing, as would inventories. Neither is the case, therefore you are wrong. Period. Oh sure, new production is coming online, but old fields are petering out, and in spite of thousands upon thousands of new wells drilled every year the total output is just barely holding steady. The Saudis claim they could push their production up, but fewer and fewer people believe them. Iraq could produce a bunch more, but for obvious reasons isn’t. Venezuela is a bit of a basket case. But if it were easy, you can bet they’d be opening up the taps, since this is crazy profit there for the taking.
So, since we seem to have reached, or nearly reached, the peak of global oil production (let us say that we might yet see higher global production, but production growth will never again outstrip demand growth - I think that’s pretty safe) the only way to balance supply and demand is to boost the price till enough prospective buyers are priced out of the market. And yes, this means that upstream oil companies are rolling in profits. There’s absolutely no way around that unless you want to throw supply and demand even further out of balance.
Price controls will result in lower supply as extremely expensive recovery techniques are abandoned, while demand will boom because of the lower price. Say hello to rations and 8-hour lineups at the station, because this is a recipe for massive shortages.
Increased taxation on oil companies will also result in lower supply, for the same reason, as again the most expensive production will be shut down, only now because you haven’t capped the price instead of lineups you’ll get even higher prices in order to balance the still-high demand with the lower supply.
Face it. There is a genuine scarcity of oil, and the prices are justified by the balance of supply and demand. Barring technological breakthroughs, you had better get accustomed to the increased cost of transportation, because it is here to stay. But look on the bright side - we’ve got to be getting pretty close to the point where it’s economical to synthesize gasoline from coal.
