The Real Oil Problem

Abstract

There is not, and never has been, an oil crisis or gap. Oil reserves are not dwindling. The Middle East does not have and has never had any oil weapon. The real problem we face over oil dates from after 1970: a strong but clumsy monopoly of mostly Middle Eastern exporters cooperating as OPEC. The biggest exporters have acted in concert to limit supply and thus raise oil price - possibly too high even for their own good. The output levels they establish by trial-and-error are very unstable. OPEC has damaged the world economy, not by malice, but because its members cannot help but do so.

Keywords: Oil crisis, oil gap, oil problem, oil reserves, Middle East, oil exports, OPEC, oil supply, oil demand, cartel, oil cartel

JEL Classification: L72, L1, L13, L23