OPEC Failure

Bloomberg reports on the last OPEC meeting. According to their article, OPEC has failed to decide on any significant production limits. In their words:

OPEC has abandoned all pretense of acting as a cartel. It’s now every member for itself.

As expected, oil prices went down even more.

The basic problem with the OPEC cartel is that everybody would love higher oil prices. But no one wants to reduce their own production to achieve those higher prices.

The way to solve this would be for climate change legislation to order and enforce supply caps. That would get oil prices up again while at the same time reducing CO2 emissions from burning oil. Another consequence of higher oil prices would be accelerating the transition to electric vehicles.

One easy step in that direction would be for the EU to impose quantitative restrictions on oil imports, and reduce the amount of oil allowed into the market each year by a constant percentage.

If someone complains at the WTO because of Article 11 GATT, tell them that this is necessary as a climate protection measure and therefore justified under Article 20 b) and g).

 

 

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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