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Page added on August 18, 2010

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Atlantic: Why OPEC Doesn’t Mind Low Oil Prices


When most people think of the Organization of Petroleum-Exporting Countries (“OPEC”), they think of a cartel that tries to keep oil prices artificially high so that its members can continue to reap huge profits. For a few years now, however, oil prices have been relatively low due to lackluster demand caused by the recession in the U.S. and abroad. Indeed, many Americans have likely noticed that the price at the pump has been well below its 2008 highs. Is OPEC concerned that prices have remained so low? Not necessarily. In fact, it views low gas prices as a good thing, for now.

This counterintuitive notion was explained by energy industry analyst Stephen Schork this morning on CNBC’s Squawk Box. Asked whether OPEC would allow oil prices to sink below $70, Schork responded:

OPEC is more concerned about long-term market share than they are about short-term price gains. Therefore with lower oil prices, what you’re actually doing is raising the entry barrier for alternative fuels. I speak with OPEC regularly, and this is consistently their main concern is about the political shift of the sentiment in the U.S. especially towards alternative fuels. The cheaper you make OPEC oil, the harder you make it to bring alternative fuels to bring on. So no, I don’t think OPEC is that concerned.

More plus video at The Atlantic

One Comment on "Atlantic: Why OPEC Doesn’t Mind Low Oil Prices"

  1. ShagRAg on Wed, 1st Sep 2010 4:58 am 

    I think that this is really good in that in underscores the fact that oil is plentiful and available.

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