174
PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
While other sources of oil, such as the Arctic National Wildlife
Refuge and offshore source, will not reverse the long-term decline
in oil production in the United States, it is only by reducing
demand that fundamental market forces can be modified. This is
best done through a comprehensive program of energy conservation, expanding public transit and accelerating development of
energy alternatives. And, we must not forget that the development of new technologies to recover oil from shut-in well is also
necessary.
The ready availability of futures, spot, and contract markets
suggests that market prices accurately reflect international supply
and demand for crude oil. But, many believe that OPEC member
states restrain crude oil production. Even though international oil
markets efficiently price and allocate the crude oil being produced,
most (but not by any means all) economists believe that the amount
of crude oil being produced is a function of market power and that
this exercise of market power produces greatly inflates world crude
oil prices. For instance, Francisco Parra, former Secretary-General
of OPEC, maintains that the Middle East with its vast reserves (65%
of the world total) and highly prolific oil wells could have, if it had
been so minded, developed reserves to produce and sell enough oil
to satisfy total world demand at under $5 per barrel, and still enjoy
substantial government revenues.
If the OPEC cartel does raise world crude oil prices by constraining production, are price controls warranted? From an economic perspective, the answer is no. Domestic price controls will
not reduce OPEC's market power. The manner in which domestic
price controls were implemented in the U.S. in the 1970s actually
increased the demand for OPEC imports and thus, its profits and
punished domestic producers who are not at fault for OPEC production decisions. Price controls also reduce incentives to increase production, whether OPEC is strangling the market or not. Domestic
price controls assist the cartel's attempts to restrict supply.
Predictions of crude oil consumption and price rises have been
made since the middle of last century. Assessment of the possible
long-term trends in crude oil price variation should be made as
the price variation is analyzed for sufficiently long period of time.
Transitory variations, which have little significance, may be omitted. However, it is expedient to investigate (1) the reason for the
step wise change of crude oil price, and (2) the main factors that
affect crude oil price, and the anticipated.
PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
While other sources of oil, such as the Arctic National Wildlife
Refuge and offshore source, will not reverse the long-term decline
in oil production in the United States, it is only by reducing
demand that fundamental market forces can be modified. This is
best done through a comprehensive program of energy conservation, expanding public transit and accelerating development of
energy alternatives. And, we must not forget that the development of new technologies to recover oil from shut-in well is also
necessary.
The ready availability of futures, spot, and contract markets
suggests that market prices accurately reflect international supply
and demand for crude oil. But, many believe that OPEC member
states restrain crude oil production. Even though international oil
markets efficiently price and allocate the crude oil being produced,
most (but not by any means all) economists believe that the amount
of crude oil being produced is a function of market power and that
this exercise of market power produces greatly inflates world crude
oil prices. For instance, Francisco Parra, former Secretary-General
of OPEC, maintains that the Middle East with its vast reserves (65%
of the world total) and highly prolific oil wells could have, if it had
been so minded, developed reserves to produce and sell enough oil
to satisfy total world demand at under $5 per barrel, and still enjoy
substantial government revenues.
If the OPEC cartel does raise world crude oil prices by constraining production, are price controls warranted? From an economic perspective, the answer is no. Domestic price controls will
not reduce OPEC's market power. The manner in which domestic
price controls were implemented in the U.S. in the 1970s actually
increased the demand for OPEC imports and thus, its profits and
punished domestic producers who are not at fault for OPEC production decisions. Price controls also reduce incentives to increase production, whether OPEC is strangling the market or not. Domestic
price controls assist the cartel's attempts to restrict supply.
Predictions of crude oil consumption and price rises have been
made since the middle of last century. Assessment of the possible
long-term trends in crude oil price variation should be made as
the price variation is analyzed for sufficiently long period of time.
Transitory variations, which have little significance, may be omitted. However, it is expedient to investigate (1) the reason for the
step wise change of crude oil price, and (2) the main factors that
affect crude oil price, and the anticipated.