Quoted From ThreatsWatch.Org
“At any rate, even forgoing OPEC courtship or OPEC threats, accessing our own reserves at home merely addresses supply. And it should be clear that supply is not the cause for the unprecedented – and likely enduring – spike in crude oil prices. Nor is demand. Whether Alaskan oil or Arabian oil, most of the going rate for either remains largely driven by our own market hysteria. Until we can recognize and address that, we will remain in this aspect our own worst enemy, eroding unnecessarily our greatest wartime asset going back through World War II – an unrivaled economic and industrial powerhouse capacity.”
America’s greatest strength in wartime has long been its economic and industrial might. Record oil prices are damaging this capacity. Yet the cause for the sustained spike in oil prices has less to do with increased global demand or fluctuations in supply than most acknowledge. Rather, an irrational market panic is by far the greatest variable in the economic equation. Nevertheless, we continue to look to address the problem by cajoling or even intimidating the suppliers. Regardless of what one thinks of OPEC states, their supply is neither the primary cause nor the principal cure to what ails us.
“The UK’s Telegraph reports on the latest regarding OPEC’s refusal to increase crude production. With President Bush’s visit to Saudi Arabia sparking the news cycle, this is last week’s news. But within this article – surely the thousandth on the subject with similar content – is an economic gold nugget from an unlikely source: OPEC.
Opec members blame market speculators and geo-political factors for pushing up the oil price, not a shortage of supply.
And that is absolutely 100% truth. Supply and demand are the fundamental arbiters of the price of goods. But the human elements of irrationality and panic set the equation askew. We would do well to recognize and acknowledge this cog in the system.
Have a look at this chart from WTRG.com which plots crude oil prices since 1970. It shows a stable price for nearly two years after the 9/11 attacks around $25 per barrel. The chart ends with January 2007 prices below $60 per barrel. Today’s record price is over $130 per barrel.
Has Asian growth accounted for a 500% increase in demand? Hardly. Has the supply dropped by 500%? No. Have both factors combined for a 500% increase metric? Not even close.
What gives? The answer is precisely what OPEC says: Frantic speculation on tomorrow’s supply, compounded daily, and geo-political events that have driven this hysterical perception.”