Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

OPEC Shoots Self In Foot

Published 07/17/08 Jeff Bennett - Print Article
E-mail - editor@economyincisis.org

After crude oil prices fell more than $10 in two days to around $134 a barrel, the price again rose to around $138 per barrel. The price fluctuations are credited to a slowing global economy and less demand, but nonetheless, many are bewildered by the shifty market.

One recent theory explaining the market looks back to 2006, when the price of oil was $78 a barrel, and falling. On Oct. 20, 2006, OPEC decided to reduce production by 1.2 million barrels daily in an effort to drive up prices, according to CNN Money.

Congratulations OPEC! Prices have risen and the world can no longer afford oil. Now it is a distinct possibility the global economy may actually stagnate and shrink if prices increase or remain steady.

Source CNN Money:

To get the full context for OPEC's cut, we need to go back to the fall of 2006, when the world was a very different place. The price of oil was falling fast, from a high of $78 in August to below $60 by late October. Hedge funds were reportedly piling into the market and driving the price lower. The poo-bahs of OPEC probably had flashbacks to the mid-1980s oil-price collapse. The cartel decided it was time to act.

On Oct. 20, OPEC voted to drop production by 1.2 million barrels per day.

That day may have been the last time OPEC had control of the oil market. By mid-January, oil bottomed at $51 per barrel and then began its extraordinary rise. Now we're flirting with $150.

Click here to contact your Representative in Congress.

Unless the above article is already copyrighted, this article is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License, EIC grants permission to use this article in whole or in part provided attribution is given, preferably in the form of a link back to EconomyInCrisis.org.