Friday, December 5, 2014
Only once has OPEC chosen to overproduce oil in order to lower oil prices (in the late 1980's and early 1990s). The cheap oil hit Brazil's bold ethanol infrastructure investments hard, and put half the U.S. ethanol production facilities into bankruptcy.
In other words, it was a classic monopoly maneuver.
And for the second time, OPEC is doing it again. For a year now, against the expectations of the experts, OPEC has decided not to reduce its output even though Iran's oil has been added to the global total, and so has a new bonanza of American oil. Everyone seemed to expect that OPEC would do what it has always done: Cut its production to keep the price of oil high. But it has not.
OPEC is trying to kill off its competition.
The good news is that lower fuel prices are always good for the economy, so as long as fuel prices remain low, we can expect to see a significant economic uptick, as we did in the late 80s and early 90s. But we can also expect to see a drop in new oil investments and a drop in interest for fuels that could compete with oil.
When it has cleared the field of its competition, OPEC will raise the price of oil again and continue gouging the world.
If you'd like to see OPEC lose its power, if you want lower fuel prices permanently, and the healthy economy it always brings, never stop working toward fuel competition. Here's how.
Author: Adam Khan, the co-founder of OpenFuelStandard.org and co-author of the book, Fill Your Tank With Freedom.