K. L., howdy,
I believe too much is made of OPEC's ability to control the market. The oil economy has dramatically changed since '73, and it is now a beast of tremendous complexity.
To control a market you must be able to measure, monitor, and predict it with some accuracy, for one thing. Does something come to mind, i.e., the "missing barrels", for example, or projected Asian Demand? Do we really think that OPEC's market intelligence is better than the western news/information apparatus? Of course not.
Affecting the markets is very different from regulating them. I believe that OPEC, while wielding the enormous blunt instrument of production capacity, is fundamentally unable to control the price of oil by adjusting production. The mechanism for cause - response - effect is simply not there. What we end up with are the kind of huge mega-swings we have witnessed in the past few years which are, in the final analysis, the result of bad or untimely information.
OPEC must realize by now that attempting to control the oil market is akin to hanging pictures with a sledgehammer: you get'em hung, but you end up with holes in the wall and mashed fingers. I think we will see OPEC command exerting stiff leverage behind the scenes to enforce compliance, while outwardly trying to show mild leadership through example and occasional light nudges.
Regards and Good Luck to All
Aggie |
