Leftists always bring in the bogey of monopolies of Capitalists if governments are prevented from controlling businesses. But in reality, only monopolies possible are government monopolies. OPEC is a government monopoly, an association of governments, controlling the prices of crude by controlling supply.
But because these governments can not control businesses outside their borders, therefore, they have never been able to squeeze the consumers, beyond mild increases in prices for an year or so at a stretch, which the newer technological developments quickly bring down again. Every time they have jacked up prices by cutting on production, massive technological advancements happened and crashed the prices.
And the same is the case this time also. As the oil prices threatened to go above $150, a new technology, fracking was developed in the US that crashed the prices again. In fact this time, OPEC itself increased supply, thus causing prices to crash, in an effort to render fracking uneconomical. But more innovations reduced the cost of fracking also, and now the OPEC has reconciled to the fact that it can no longer control the prices.
If human beings are free to trade and innovate, and nobody is permitted to use force, monopolies are impossible. Only governments make monopolies possible, only they sustain them.
At americanthinker.com, Chriss Street has details:
“OPEC’s attempt to overproduce crude oil for export to crush prices and bankrupt the American shale-fracking oil boom has failed, according to a draft OPEC long-term strategy draft report seen by Reuters ahead of the cartel’s policy meeting in Vienna on June 1st. The report forecasts that crude supply from rival non-OPEC producers led by the U.S. “will grow until at least 2017.”
“Since June 2014, oil prices have experienced a significant reduction, reaching levels even lower than the crisis experienced in 2008, yet non-OPEC supply is still showing some growth,” the OPEC report said.
Flat to down worldwide demand for oil means that OPEC’s 30 million barrels per day (bpd) share of production will fall to 28.2 million. The cartel can either cut output from the current overproduction level of 31 million bpd or tolerate depressed oil prices.
The current international price standard called “Brent crude” has dropped from about $115 a barrel in June 2014 to $62 today as a direct result of the American shale-fracking boom adding 4.5 million barrels of oil per day to the U.S. market in the last 6 years. The U.S. standard called “West Texas Intermediate” (WTI) sells at $57 a barrel, almost a 10 percent discount.
With revenues plummeting, most OPEC members are in a financial crisis and are forced to increase production from last year and flood the world market to financially survive.”( from the article)
Read the article here.