The Oil Problem

The price of oil has risen to over $130 per barrel. What is the cause of this rise? In the latest forecasting survey of the Wall Street Journal, we read that a majority of economists attribute rising food and oil prices to

It is interesting how little we know regarding the future price of oil, the future development of alternative energy sources, and the ultimate economic and political impact of both. Oil production may be approaching an irreversible decline. On the other hand, Russia and OPEC may have mustered the necessary discipline to limit the supply. How can we determine the operative cause in this instance? One has only to consider human nature and the history of OPEC to sniff out the truth.

There has always been a competition for market share within OPEC. While the Arab oil embargo of 1973 was effective, Saudi emotions were passionately engaged in supporting the Arab side in the war against Israel. For the first time the United States gave material assistance to Israel. When the embargo ended on 18 March 1974, Saudi Light (oil) had gone from $2.59 per barrel to $11.65 per barrel. That