Low Fuel Prices Create Winners and Losers

Monday, December 22, 2014

In late November, in Vienna, OPEC decided not to do what it normally does when oil prices get too low: They chose not to cut their production levels. Some OPEC members can afford this because their oil is cheap to produce. Some countries like Venezuela will be hurt badly by this decision, but they don't have the same clout within OPEC. This is a quote from an article in USA Today:

In Vienna, Venezuelan Oil Minister Rafael Ramirez effectively conceded defeat when he appeared to angrily storm out of the OPEC meeting once a no-cut decision was signaled.

Over half of officials from OPEC countries — the poorer half — were consistently on-message that the market is over-supplied and that something needed to be done. Nothing was done.

Shale-oil producers in the United States and Canada could also be hurt. Low crude prices make it harder for them to launch new drilling projects or expand operations because they count on high returns to finance the costly penetration and oil harvesting.

These are interesting times. We'll see how it all plays out. In the meantime, the lower fuel prices will immediately ease the financial burden of hundreds of millions of people around the world because the artificially-induced high oil prices we've experienced around the world have functioned like a regressive tax on the whole world.

What we're getting now is a taste of what could happen if we had true fuel competition in America. It's a goal worth fighting for. In the meantime, enjoy the low prices while they last.

3 comments:

Anonymous,  December 23, 2014 at 11:55 AM  

Gov has already decreased amt of new contracts for drilling that could be done and puts limits on amts of oil that can be produced.

Anonymous,  December 23, 2014 at 5:49 PM  

May be a little behind the scenes maneuvering to put the hurt on Russia and Iran.

Anonymous,  December 24, 2014 at 2:26 AM  

My thoughts exactly.

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