Not really. Only if you actually want to compete. Given that you're creating an artificial lack of supply (something OPEC does all the time), you can control what the demand level is and price accordingly. It's called price-fixing, which is supposed to be illegal in this country, but if you don't enforce it, then it will just happen. Stuff like this happens all the time in other markets also (a few know recent high demand cases include computer RAM chips and LCD screens).There is every incentive to increase production.
There's every incentive to sell as little as possible of the actual product in a market of a finite good in high demand. I'm sure OPEC could double production tomorrow, halve the price of their oil and surpass non-OPEC producing countries just in order to regain the market-share they lost since the 80's. You just don't see that because holding on to the oil longer-term is more valuable to them.
"By the way, the US is a net exporter of gasoline."
btw, US Big Coal is tearing up the US and is increasing its coal exports to China.
This ing country is so self- ed by the Repug, corps, and capitalists.
And of course, the Repugs and tea baggers remain totally silent on coal/fuel exports.
No, actually they can't double their production tomorrow. Pretty much every OPEC producer is working at capacity, save the Saudis, and most experts think they are bumping up against their limits as well. If you like, I can re-research that and provide some supporting links.
Oil exploration is not like having spare factory capacity that can be scaled up at will.
You have to drill new wells and find new sources as old ones deplete, and do that faster than you deplete your sources in the first place.
OPEC hates high prices because of what is termed "demand destruction". If prices remain high for too long, people either use less, or find other energy sources.
Energy sources are increasingly becoming interchangible.
Having a trillion barrels of oil in the ground is worthless if everybody is driving electric cars.
Some think SA is well past their peak oil, explaining why they keep their reserves so secret (with the complicity of the US/UK oilcos, of course).
It is an ill-kept secret that OPEC reserve estimates are 99% political, and 1% scientific data. For those who are unfamiliar, production quoatas are based on these reserves, so more "reserves" means they are allowed to pump/sell more oil.
http://en.wikipedia.org/wiki/Oil_res...n_Saudi_Arabia
http://www.eia.doe.gov/cabs/Saudi_Arabia/Oil.htmlIn a study discussed in Matthew Simmons's book Twilight in the Desert, 200 technical papers on Saudi reserves by the Society of Petroleum Engineers were analyzed to reach the conclusion that Saudi Arabia's oil production faces near term decline, and that it will not be able to consistently produce more than 2004 levels.[6] Simmons also argues that the Saudis may have irretrievably damaged their large oil fields by over-pumping salt water into the fields in an effort to maintain the fields' pressure and boost short term oil extraction amounts.
Challenges to the Upstream Development Program
One challenge the Saudis face in achieving their strategic vision to add production capacity is that their existing fields experience 6 to 8 percent annual "decline rates” on average (as reported by Platts Oilgram in 2006) in existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline.
Decline estimates for Saudi Arabia vary widely, however.
The Ministry of Petroleum maintains that decline rates in Saudi Arabia are around 2 percent annually. Saudi Aramco has stated that it will also conduct additional drilling at existing fields in order to help compensate for the natural declines from the mature fields.
[the EIA is being diplomatic here, IMO. Most outside experts think the Saudis are full of when they put out "pie in the sky" estimates of their own capacity--RG]
Saudi Aramco, Saudi Arabia’s national oil company, estimates that the average total depletion for Saudi oil fields is 29 percent, with Abqaiq (the oldest) 74 percent depleted, the giant Ghawar field having produced 48 percent of its proven reserves and the younger Shaybah, just 5 percent depleted. Aramco also reports that Saudi oil reserves are likely underestimated, not overestimated, although some analysts have disputed Aramco's optimistic assessments of Saudi oil reserves and future production. Minister Al-Naimi has refuted these contrarian arguments, and stated that Saudi Arabia could add as much as 200 billion barrels of oil to proven reserves after an extended period of investment and exploration.
Like I said, you don't understand supply and demand.
there is money to be made by introducing more supply. The price may be sightly lower, but if it makes you slice of the pie bigger, it pays off.
Your thought assumes a monopoly or similar situation, which it isn't.
"you don't understand supply and demand"
goddammit, you're stupid
You don't understand restricting supply to force up price into essentially inelastic demand while selling less product.
Cheap oil has the planet by the short-and-curlies, and the source countries and oilcos know they are untouchable and unstoppable.
No, I understand that. Problem is, that the entire world doesn't conspire to limit supply. It would take all producers to refrain from producing more. OPECC does, but even they have members that violate that time to time to increase their market share, including over stating their reserves.
Wait...
You might be right...
Obama's actions do limit our oil!
Specifically how? and to what effect?
This oughta be good.
I believe you. That said, don't forget that Saudis tried to increase production in 85 to regain market share, and they were scolded by the other OPEC colleagues. They also didn't gain any market share.
The 'double the supply' was an exaggeration to make a point. That said, OPEC is simply not working at capacity right now. I was reading about a month ago that they could increase supply if needed (not double, but enough to prevent the price runaway), but they just didn't think the current demand warrants it. I don't know what's the situation with non-OPEC producers.
Alternates are simply not commercially viable when gas is below a certain threshold. That threshold is exactly where gas is priced. It simply makes no sense to sell for less, considering the scarce nature of oil.
Last edited by ElNono; 01-04-2011 at 12:58 PM.
You don't understand that oil is a limited resource that appreciates more as time goes by due to its scarce nature. Somebody sitting on a oil field much rather sell as little as possible for as much as they can. Simply because that same oil will be worth 5x more (arbitrary figure) 10 years from now.
Saudis already tried to play the 'gain market share with cheap oil' game and it didn't work for them. Non-OPEC producers remained constantly above them.
The only way regular supply-demand rules rules would apply is if somebody can flood the market with cheap oil, but then that would make it non scarce, which really isn't the reality with that product.
Fair enough.
OPEC has SOME control over prices, but increasingly less as time goes by, and non-OPEC's share of production increases.
The thing about "market share" only really applies if your product is not fungible. You only really gain market share if one can even mildly tell the difference between products. Commodities don't work like cars.
I found this bit on 1980's oil production:
http://en.wikipedia.org/wiki/1980s_oil_glut
It very clearly outlines the demand destruction so feared by OPEC, and why they don't push for higher prices.
I don't buy the "let's keep it in the ground to make it's value go up". That is simply not the way I understand oil production to work at all.
They'll push for as high prices as they can as long it's economically viable. That applies to OPEC and non-OPEC producers.
None of the oil companies are interested nor involved in any kind of compe ion. When there's real compe ion, there's winners and losers. When all you see is winners, then something is not quite right.
the producers will charge as much as they can, aka "free" but captive market, up to the point where the world is pushed into depression, as it was after the 67,73,79 oil shocks.
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