The Real OPEC
There is something of an urban myth regarding the OPEC cartel. The way this myth goes, our good global allies, the benevolent Saudis, have for decades run the cartel not really for what cartels normally do – which is jacking up prices to pure monopoly levels – but rather to maintain a ‚Äústable‚Äù global energy price, thereby benefiting all, including, God bless him, Tiny Tim.
And here is a picture of global oil pricing for the last three years, going up from around $14 per barrel, to the high this summer, just a whisker shy of the $80 first called here at SNS. Since that peak, we now see a re-trenching into the $60 range, with recent probes even slightly under that mark.
The abrupt rise in energy prices has levied an effective tax on every activity undertaken by every individual and citizen in every country, all payable back to oil producers. It has changed the balance sheet of the Saudi Royal Family, and turned Russia from a craven dog into a darling prince.
It has given Mssr. Chavez a platform he never earned nor deserves, and emboldened weirdos everywhere to do whatever weird thing they dreamed of last night, paid for by the increased oil revenues they never had dreamed of.
Did you really think a cartel was in any sense ‚Äúon your side‚Äù? This cartel may be shaky, too small, and generally unable to police its own members, but no one should be confused about its core charter goal: to increase the cost of energy far beyond its market value.
Now let me get to the serious part of this story: the Saudis are becoming increasingly irrelevant, as Chavez claims (and can probably prove) larger reserves, despite the poorer (heavier) quality of his deposits.
In the new OPEC world, OPEC matters, and it has sloughed off the urban myths in favor of – what else? – massive shifts in global wealth. I certainly don‚Äôt blame it – and now we can all talk about OPEC for what it really is: an anti-market device for enriching its members. Not you, generally.
OPEC is just getting warmed up.