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Originally Posted by octothorp
OPEC will only let the price of oil fall so far. Every time that a big supplier returns to production (Iran & Iraq in early eighties, Kuwait in the 90s), OPEC decreases production, to stop the price from dropping too much.
When the current factors limiting OPEC production (limited production in Nigeria, Iraq, and Venezuela) are resolved, OPEC will likely do the same again, assuming Iran hasn't limited their production.
OPEC's control is the primary reason that oil prices have rarely dropped below 1.40 US/G (using the adjusted prices). This is the problem with the whole idea that the Iraq war will produce lower prices; prices were right along the historical average prior to the war on Iraq.
So we'll likely see as much as a decade of inflated oil prices, after which, OPEC will cut production to ensure that prices don't drop that much below pre-war levels. Yes, the whole war will result in huge profits for the oil companies, but it will not result in a decrease in pipe at the pump to below pre-war levels.
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You think that the US drilling for a increase in their own supply of oil, taken together with Canada's(Alberta) ever increasing oil supply can somehow take away the influence that OPEC has?
Or how would you solve the problem?
