One of the most novel arguments against raising oil production is that it won't help decrease prices. That may seem counter-intuitive, but it is what the ministers of OPEC want consuming nations to believe.
Algeria's Energy and Mines Minister Chakib Khelil told Reuters, "We have all the factors that impact the price, so if we increase, we are going to have the same phenomenon that happened before, which means, it may not even impact on the price." He may have missed the "supply and demand" lecture in his college economics course.
OPEC has several reasons for not improving supply, but the idea that it will not affect prices is absurd. Just the announcement of improved output from the cartel could cause a stampede of selling in oil futures.
What OPEC does want are guarantees from the big consuming nations, especially China and the U.S., that they will not invest too much in nuclear power and biofuels. The producing nations want to know that there will be oil demand two and three decades out. They are making plenty of money now, but will that continue in 2030?The attitude being taken by OPEC is that it will not increase output in December. That could cause prices to rise again. But a promise of dialing back alternative energy development that might cut oil demand would almost certainly get more shipments of crude moving.
Douglas A. McIntyre is an editor at 247wallst.com.
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