Thanks to everyone that chipped in on the OGEC project. It looks like at our last meeting the unanimous decision to go into recession has worked.
If you’re lost, do not fear. A few months ago I formed the Organization of Grain Exporting Countries to combat the Organization of Petroleum Exporting Countries, OPEC. As the representative of the US, I met with other bloggers of questionable relevance from around the globe to decide what we should do about this oil thing. The choice was to throw the world into recession, thus plummeting the value of oil.
With oil at highly unexpected lows and possibly headed lower, the representatives of OPEC met in Cairo on Saturday to discuss the situation. At this point everyone seems to be agreeing that it was speculation that drove the price up earlier this year, rather than a market adjustment to new demand. Since then demand has plummeted double digits in the US and the price of a barrel of oil is almost down $100. The countries of OPEC are in disagreement on what they should do.
Cutting production by a few million barrels a day is a likely goal, however countries like Iran and Venezuela has still not met their promises to cut production from previous meetings. What does this mean for us? Turmoil within OPEC means competition is brewing. Venezuela may think they must continue to sell oil at their current output to keep their own country’s revenues steady. This would make sense as a global recession is coming into play. “With other industries struggling, we can meet the needs of our people by pumping out more oil” they might say.
If OPEC fails then the US stands to benefit from many different angles. First of all a cartel will no longer decide how much oil the world deserves. But most importantly, this will increase competition among the OPEC countries that are after the American dollar. Increased competition means further reductions in the cost of oil. Oil is still considered the backbone of the economy. We may look back on oil in 2 decades and decide it was the only thing that saved us from a 2nd Great Depression.
My point is not to say oil should remain at the top of America’s priority forever. I fully back all alternatives energies and modes of transportation. This is also not a contradiction to my backing of $5.00 gas. However, perhaps $5.00 gas should wait for an economic recovery. It will be bittersweet. We have cheap gas, but we’re in a recession. Once we recover, everyone expects gas to go up again. Dandy.
For a detailed recap of OPEC’s meeting, check out the read link below.
Read
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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