Does OPEC have any political aspirations?

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I have read a lot on this forum about OPEC wanting higher profits and/or perhaps Y2K production problems being the cause of there reduced production. But I was wondering if their maneuvering has political ends attached. They sure are getting a lot of attention from our higher ups in the gov. Could this be a power move to remind us from wence our mana (oil) flows?... Perhaps related to NATO weight throwing around or Mid East peace negotiations?

-- Jack (silvtop@67.com), January 25, 2000

Answers

OPEC has a very diverse membership, ranging from Venezuala to Nigeria, Kuwait to Indonesia. It would be difficult to imagine any political agenda so unamnimous that it would not weaken the cartel by increasing internal friction. What they share in common is a desire to maximize their oil profits.

Even this common aim is not enough to ensure unanimity of action, because there is disagreement over the best way to maximize profits. Some OPEC countries would benefit most by raising short term prices as high as possible. OTOH, Saudi Arabia has by far the largest reserves, and so it takes a much longer view of profitability. The Saudis have operated on the premise that too high prices tend to weaken Western economies and to increase their use of alternative energy. They want prices set low enough to counteract this tendency.

To the extent any one country dominates the politics of OPEC, the Saudis are in the driver's seat. Clearly, they have a financial reason for a price increase. But, they understand they will *never* be a world-dominating military power. Any such illusions of granduer could only make them a target for a war. IMHO, OPEC is not driving prices up in order to damage the USA or NATO. They are just adjusting prices to bring profits closer to their "sweet spot".

-- Brian McLaughlin (brianm@ims.com), January 25, 2000.


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