OPEC Can’t Make High Oil Prices Go Away
High oil prices are a symptom of economic and monetary imbalances, not just a consequence of Organization of the Petroleum Exporting Countries (OPEC) decisions. Throughout history, we have seen how OPEC cuts have done little to elevate prices when diversification and technology added to rising efficiency.
Likewise, OPEC output increases do not necessarily mean lower prices, let alone reasonable ones. Increased OPEC output helps but does not solve price issues, even if they would probably like to.
The problem in the oil market has been created by years of massive capital misallocation and underinvestment in energy created by extremely loose monetary policies directed by governments that have penalized capital expenditure on fossil fuels for ideological reasons.
Misguided activism and political nudging in the middle of massive monetary injections have created massive bottlenecks and underinvestment that hinder both security of supply and a technically feasible competitive energy transition.
Massive injections of liquidity have caused a double side effect: rising malinvestment in nonproductive activities and now a large inflow of capital into so-call
Article from Mises Wire