By Matt Miner

From today's WSJ:



You know what makes sense?  Trying to drive up price as demand plummets.  See, when fewer people buy your stuff, watcha' do is...Raise the price like hell!  That'll show 'em - they'll buy more for sure!

Oh wait.  No, actually it doesn't work like that.  OPEC is being very short sighted here.  If they had any sense of strategy, they would let the price fall and let the world get re-hooked on cheap energy.  Also, in the current downturn, and with cheap energy, investment in renewables would pull way back as is already happening.  All those smart people would go get other jobs, and we'd set this process of reducing oil demand back by at least three to five years.  But instead OPEC will try to manage short-term revenue, thereby lending support to continued renewables investment.  Cool, huh?

The cloud in this silver lining is as follows: The lovely countries that produce our oil (Chad, Niger, Venezuela, Iran, etc.) have an immediate finance problem.  If oil goes to $40, these countries will get much poorer.  Of course, in the long run, even if oil stayed at $140 but demand was cut in half, they'd still be in trouble.  I will go ahead and predict that the process of weaning ourselves from oil will not be without geo-political turmoil.  I also will predict that between climate change, general outrage, and the current economic woes, we've passed the tipping point on this weaning process.  If OPEC really takes production way down, the shift will just accelerate.

Of course, I may be completely wrong.  Check back in ten years.

 

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