Because of the turmoil taking place in Libya, we have recently observed an upward surge in oil prices here in the United States. Media outlets seem to find this correlation between an unstable Libya and rising oil prices as something natural and expected. However, I think this is far from the truth for one simple reason: Libya accounts for only 2% of the worldwide production of oil.
If the oil production in Libya is stalled for whatever political, social, or economical reason, it doesn't make sense for oil prices to increase like what we saw a week ago in the US. Moreover, Saudi Arabia pledged to compensate for any shortage in oil caused by the recent troubles plaguing the Middle East. Therefore, these facts lead me to believe that oil producers are taking advantage of the political climate to increase their margins. I can't understand why we don't hear about this theory on major news channel. It seems like they are all willing to accept a simplified version of the truth: uncertainty and instability leads to higher prices. For my part, I think this is not a satisfactory answer.
Perhaps a more specific answer might be OPEC, consisting of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela, the majority of which probably don't like the U.S. too much and are no doubt eager to get a few more dollars a gallon. Greed (not only among OPEC members but other oil producers such as those in Alaska and the Gulf of Mexico) is probably the answer, as you implied. Of course, that wouldn't make for a great news story (too depressing and real), so we're likely to hear more about how uncertainty and instability leads to higher prices for the time being.
ReplyDelete