Do you think it's a good idea for OPEC to push up oil prices with their production cuts?
While the world economy is suffering? Wouldn't that cause a rise in inflation and potentially lead to stagflation?
Would suppressed oil prices in the medium term keep material prices down and help the economy recover faster?
Answers
989 points
rvilmur answered 9 months ago …
There is a need for higher oil prices so that there will be more investment in exploration and new production. Low prices for too long will eventually cause a supply problem and much higher prices. The peak oil concept is real and more exploration and development of the harder to obtain oil is needed.
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265 points
fuzball answered 9 months ago …
Think of it from the other side. Many of the oil producing countries have just that asset to their name. The oil is what makes them a viable nation and pays for all the services required of their people. The recent drop in oil prices have had a serious affect on their economy. They need to have oil prices to rise, hopefully to a sensible price, and will do anything they can do to make it happen.
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2222 points
readytoretire answered 9 months ago …
It depends on whose viewpoint you are looking from. If all the money we sent out came back as purchases of our products, then not much. As it doesn't, it tends to be like a tax, where another part of the country gets the benefit.
As to the lasting effect of higher oil prices, it goes back to how much. Since OPEC saw that it didn't phase us to have $100+ oil, they think that $70 would be fine in this environment. Saudi has long wanted a gradual increase, but nothing fast, because of the negative impact. When gas went up so much so fast, people started making changes, with both usage, and habits. Saudi doesn't want fast changes, as these would tend to lower long term demand, and they have oil for the long term. Other countries in the middle east don't have the amount of supply, so they don't care if the price goes up fast, it means more to them. Saudi knows that a concerted effort to change the fuel supply to the auto would be disasterous for them long term.
3963 points
MNSL answered 9 months ago …
I do not think OPEC can put up oil prices now when there is clear demand destruction globally. It think there will be some demand for oil once global economy improve in 2015.
Higher oil prices will destroy many industries. Ex: Auto, Airlines, Distribution, Food and almost everything. Already some have burst now. Unemployment is rising rapidly. Currencies are falling.
We have some characteristics of recession, inflation. Hyperinflation, depression and stagflation now.
Current turmoil began due to overinvestment in property, oil and other non productive assets and commodities.
