The goal of the cartel was to stabilize prices right in the sweet spot to keep the world addicted. Too low and players start losing money, too high and people switch away from oil, too much volatility, and people switch away from oil.

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Ajedi32 19 hours ago | parent | next [-]

> Too low and players start losing money

Only the non-competitive ones. That's how competition works.

OPEC would be deemed an illegal anti-consumer price fixing scheme under the laws of any country with even the most basic of anti-trust laws, if not for the fact that its entirely composed of sovereign countries not subject to any law but their own.

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philistine 18 hours ago | parent [-]

If the price is too low and fields stop being exploited because they're unprofitable, you reduce the volume produced each day. That means there's scarcity with a low price, and you're back at trying to switch en energy source because you just can't get oil.

That moves prices upward, because people are willing to pay more, but increasing production is not like turning the faucet in your home. It takes time. This is the instability of oil production that OPEC tries to prevent, to keep the world hooked on readily available just cheap enough oil.

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Ajedi32 18 hours ago | parent [-]

In a free market "scarcity with a low price" is a contradiction. If there's scarcity the prices will be high, not low. And nobody's going to be reducing production if the prices are high.

> instability of oil production that OPEC tries to prevent

First of all, if the goal is to prevent instability OPEC is doing a terrible job. Secondly, a cartel is not needed to prevent price instability, as demonstrated by the hundreds of other commodity markets around the world which are not controlled by cartels engaging in price fixing schemes.

As with any cartel, the purpose of OPEC is to maximize profits for its members, artificially fixing the price of oil at a level higher than what it would otherwise be in a free market not controlled by a cartel. Price stability is a side effect of that, not the goal.

	▲	chasd00 17 hours ago \| parent [-]
		> First of all, if the goal is to prevent instability OPEC is doing a terrible job. I mentioned this upthread, the instability OPEC is trying to prevent is civil unrest from not being able to fund their social programs and governments. They need a price that puts them in the black and the rest of the world will pay. If it was a free market the fracking boom would still be raging and oil would be $30/bbl. Many gulf nations would fall apart if oil was at that price for a long period of time hence the price manipulation. (I'm not sure how they got the frackers to ease up, some say many of the frackers were bought out by OPEC members and their wells capped but that's just conspiracy afaik)

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chasd00 18 hours ago | parent | prev [-]

> The goal of the cartel was to stabilize prices right in the sweet spot to keep the world addicted.

If the price of oil remains low the gulf governments can't fund their social programs and risk instability. That may not be the only reason for OPEC but it's a major one.

When fracking really took off the writing was on the wall and I think many OPEC nations have since taken serious measures to shield themselves from price drops. This is probably why the UAE can now feasibly leave OPEC. I thought the fracking boom was the end of OPEC but they managed to hang on.