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Source link: http://blog.mises.org/3561/holding-hands/

Holding Hands

May 6, 2005 by Christopher Westley

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Blaming OPEC has been in political fashion for over three decades. Unfortunately, rising gasoline prices are more complicated than simply the fruits of a successful cartel. Economic theory tells us that successful cartels sow the seeds of their own destruction. The reasons are twofold: success makes cartel-members’ temptation to cheat too great and attracts non-cartel members to enter the market.FULL ARTICLE

{ 5 comments }

Harry Valentine May 6, 2005 at 10:52 am: Funny the American president negotiating for lower oil prices with Saudi Arabia, when Alberta (Canada) has become America’s biggest supplier of oil.

Harry Valentine
billwald May 6, 2005 at 11:35 am: First intelligent commentary I have read about the recent jump in oil prices. Boggles my mind that gasoline retailers are expected to sell for less than the buyers are willing to pay.

Only Car manufacturers sell for less than marginal cost but they make their profit by loaning money to stupid car buyers.

So maybe it is SUVs because the subsidy on the purchase price enables the drivers to run uo the price of fuel – they are willing to pay more so price will be raised to meet their limits?
Vanmind May 6, 2005 at 9:36 pm: Sure Harry, but who’d ever want to hold hands with an Albertan?

Ha.
Steve Pilotte May 9, 2005 at 9:58 am: I agree with the principle of government nonintervention in the markets and Wesley’s comment that the explanation for rising oil prices is a complicated one. What makes Wesley’s explanation no different from those of most other economists is his failure to mention the role that mass psychology plays in any commodity market. Though global consumption of oil has increased since 1998 when prices were below $10 a barrel, the fivefold increse in price since then can not be attributed solely to fundamental factors. Consumption and demand are not the same thing. Commodity speculators also play a key role in the impact on prices. -Steve
Dewaine May 9, 2005 at 9:52 pm: The Independent Institute has an interesting article in the latest issue of their journal, The Independent Review, about the rising dollar-price of oil in the 1970′s. It is especially pertinent today, as the falling value of the dollar robs people of their savings and drives up the nominal cost of all goods.