The price of crude has fallen significantly over the past few weeks on signs of continually eroding demand. OPEC, not surprisingly, is unhappy about this (see the bottom half of that article). But so far, their modest attempts to react to the falling prices have not worked.
From the linked article:
Now it seems to me that a cartel that controls so much of the world’s oil production could simply decide to create an artifical shortage to keep oil trading over $100/bbl or whatever price their happy with. They could easily cut production to whatever it takes to get the market to react. With other goods, cutting supply to raise prices doesn’t always increas profits because you’ll crush demand and sell fewer units. But with oil, the demand is fairly inelastic. The world will, for the most part, buy what it needs regardless of the price. Demand may go up or down due to a lot of external forces, but much of that behavior is independent of price. If that’s the case, one would think that OPEC would try to take advantage of the inelastic demand.
So, logically, something must be keeping OPEC from fabricating an oil shortage, and causing them to resort to moderate corrections in output in response to falling prices. What are those influences? And what is the likelihood of them doing just that in the face of those pressures—that is, getting desperate, cutting production drastically, and trying to get the price of crude back up to $150/bbl sometime down the road?