The Worlds Biggest Legit Cartel: Crude Oil.

876 words - 4 pages

Crude oil, a vital world resource, is slowly becoming more affordable. Political turmoil in one of its member's states, and the threat of sanctions against another sent gasoline prices near a dollar a litre recently. But now that bubble has popped, followed by a sharp fall of almost 60 cents a barrel. With the fall of crude came the fall of crude, heating oil and both of their respected future contracts. Prices may be on the rise again depending on the outcome between the UN and Iran over it's nuclear program.With prices so high, traders had a chance to recoup some losses during the short, violate week before after big-time Russian crude producer OAO Gazprom cut back production to the rest of the EU to have enough supply for Russia during this colder than normal winter. This was just a slight hiccup, says Phil Flynn; "with U.S. oil inventory data expected to show supply builds in gasoline and distillates Thursday."The market is very bullish with many more being optimistic rather than pessimistic even though issues with Iran and Nigeria might erupt. If Iran were referred to the UN Security Council, the market would erupt in frenzy, with every trader trying to buy as much as they could before prices go higher. Supply and demand work different here because traders rather have product than not, which results in huge sprees of buying that drive the price of gasoline and other related goods skyrocketing. Eventually, traders will sell that surplus and take some profit, recovering from losses or pocketing the cash to use for another day.OPEC is a collation of the major exporters of crude oil in the Middle East, Africa, Asia and South America. This includes Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE, and Venezuela. OPEC currently controls 78.4% of the worlds Crude Oil supplies in the world. OPEC manipulates prices by cutting or adding more to a total production quota, therefore controlling the supply portion of the market.OPEC is what is coming to be known as a cartel. Collusion and price fixing are normal at regular meetings, and really do exploit North America and the World's need for crude oil. In North American markets, this is illegal and the members of OPEC could face jail time and severe fines/penalties. Because OPEC is not based in North America, there is no power to stop them from doing what they wish.Crude oil is surprisingly inelastic mainly because there are few substitutes in place today. There are electric and hybrid models, but that accounts for less than 1% for all total cars...

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