Does the U.S. have the right to demand that OPEC increase supplies?

Posted Mar 8th 2008 12:46PM by Peter Cohan

With oil hitting a record $106 this week, this seems like a relevant question. My feeling is that the U.S. has the right to demand the increase. I believe in freedom of speech and see no reason why that freedom of speech should be constrained when it comes to market matters.

Obviously, OPEC is free to respond as it sees fit. I don't think that the current U.S. administration actually wants the price of oil to drop – however, it wants to be seen as being sympathetic to the interests of those who are paying to enrich the oil producers.

Meanwhile, if the U.S. was serious about wanting the price of oil to drop, it would take market actions that would prompt OPEC to reduce production. One such action would be to reduce oil consumption enough to make the current level of production unprofitable for OPEC.

I think such action would speak louder than the appropriate – but ineffectual – exercise of freedom of speech in asking OPEC to reduce its production. What do you think?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Print this

Reader Comments (Page 1 of 1)

3-11-2008 @ 12:17AM

Bosco said...

".. as being sympathetic to the interests of those who are paying to enrich the oil producers." Huh? Who are you talking about? WE, users, are paying to enrich the oil producers.

".. it would take market actions that would prompt OPEC to reduce production." Like what? Oh. Just one such action ".. reduce oil consumption enough to make the current level of production unprofitable for OPEC." How? Mandate less use? Raise taxes on gas?

Reducing consumption would make current levels of production unprofitable but is easily enough corrected by reducing production. Even so increasing world demand is likely take up any slack. AND how much of the price increase we, Americans, see is due to the falling dollar?

Thanks Bosco

3-08-2008 @ 4:52PM

D Smith said...

For those who want to take away Exon's and other oil company profits, just remember that the profits are paid out to stockholders like me. Be mad at me for finding a good investment, or buy some Exon stock yourself and quit complaining. If Hillary pushes socialism there will be no profits to take away.