Organisation of Petroleum Importing Countries
13 Pages Posted: 25 Nov 2008
Date Written: November 25, 2008
Osama Bin Laden, in 1998 interview, said that oil should trade at $144 a barrel. Oil did hit $144 a barrel in June 2008. At such an oil price, oil exporters get to make almost $2 trillion extra. This gives oil exporters enough wealth to buy financial and other assets of oil importing countries. Indeed if oil prices remain at high level for 30-40 years, oil exporters could entirely buy all financial assets in developed world. In short term, high oil prices could lead to inflation and stagnation, the kind that is being witnessed all over the world in 2008.
Oil prices are determined by supply and demand. Organisation of Petroleum Exporting Countries (OPEC) pushes up the price by cutting supply. Prices often fall, when demand declines. Clearly, if there is a premeditated, deliberate effort to reduce demand, this could reduce prices.
Hence it proposed to create Organisation of Petroleum Importing Countries (OPIC), as opposed to OPEC, which would seek to reduce oil demand. OPIC would reduce oil demand by encouraging and enforcing public transportation, use of two wheelers and car pooling and even rationing.
OPIC would also encourage vegetarianism as that would make available land in plenty for growing biofuels, help fight food scarcity and reduce green house gas emissions.
Keywords: Oil, OPEC
JEL Classification: Q40, Q41
Suggested Citation: Suggested Citation