OPEC 50th Birthday: 50 Years of Oil Price Manipulation

It’s been 50 years since governments around the world have been manipulating the oil price market.

This from the Economist,

OPEC, the cartel of oil producers, celebrates its 50th anniversary on September 14th. The organisation was founded in 1960 with the explicit purpose of manipulating oil prices by controlling supplies. It has generally proved successful. OPEC controls around 80% of the world's proven reserves and over 40% of the world's production among its 12 member states. The Gulf states that dominate OPEC have the biggest reserves and lowest costs, so can most easily turn the taps on and off when required to keep prices high. Despite the slow return to health of a sickly world economy, oil fetches a lofty $75 a barrel, which Saudi Arabia, OPEC's most influential member reckons is "ideal".

One should note that the cartel, which has been responsible for 40% of the world’s production, holds also 4/5 of the proven reserves. This means that the cartel isn’t limited only to oil production but also in the access to oil reserves for production. Limiting access to production means restricting available supplies.

Of course, the production cartel (OPEC) hasn’t been the only factor. Otherwise the prices of oil would have steadily trekked upwards over the last 50 years.

That’s because there is another cartel involved: the US Federal Reserve, whom represents today’s de facto US dollar standard system.

Monetary inflation by the US Federal Reserve has produced boom bust cycles in oil prices. The US Fed’s loose money policies has been instrumental in the huge price swings in the price of oil by artificially stimulating demand during the boom days, which subsequently resulted to the ensuing busts.

Bottom line: Unseen by the public has been the 50 years of manipulation by different government sponsored cartels that has vastly eroded our purchasing power and has prompted for intensive volatility in the world’s economic trends.

50 years of government “greed” at the expense of the people.

Ironically, the public sees things the opposite way.