Source: http://www.economist.com/news/finance-and-economics/21635510-what-oil-cartel-up-making-best-low-price
With oil prices lower than $70 a barrel, some OPEC members are doing nothing to bring the price back up. Saudi Arabia is sitting on $900 billion in savings and can afford to sit around with such low prices. Additionally, the fact that Saudi Arabia can produce oil at a cost much lower than many other members of OPEC furthers this point.
However, if OPEC is acting as a cartel shouldn't it be looking out for other members? Venezuela, is currently suffering from these low oil prices in the worse way possible. They are cash strapped and predicted to default on a number of financial obligations in the coming weeks.
As an organized cartel do OPEC members have a responsibility to help other members out (e.g. Saudi Arabia and Venezuela)? If so in what capacity?
This article shows the serious impact that crude oil prices can have. While lower prices are good for consumers, this article shows the serious negative impacts they can have on oil-producing nations. It will be interesting to see whether or not oil prices increase in the near future.
ReplyDeleteThe low prices have a clear effect on oil-producing countries, a lot of large companies in the industry are having to sell their oil at price that is under their break-even point. I feel like people are just enjoying the low gas prices and not looking at the overall effects setting prices so low has on the rest of the world. These lower prices have helped the consumer greatly, I can see why people overlook this fact. As long as they are saving money, they don't care the effect it has on others.
ReplyDeleteThis is an interesting topic to think about. I would wonder if this could be a political dig at Venezuela to weaken them. Recently, it looked like the U.S. may have been encouraging what OPEC was doing with the prices so it would hurt Russia and now I wonder if the same thing could be happening to hurt the oppressive, corrupt, and unicameral government in Venezuela.
ReplyDeleteI think this is a point many miss. Although low oil prices are good for the consumer to generate more disposable income, the country's reliant on the sale of oil are hurting. If oil is being sold for under the equilibrium then there is a problem that can't afford to wait. It will be interesting to see if prices rise in the near future although many sources claim oil will drop well into 2015 by significant amounts.
ReplyDelete