The Race to the Highest Price

So the Iranians are in favour of reducing oil output to raise the price of oil. As I’ve said before the lower oil price causes me a lot of distress, but at least it is causing problems for some of my least favourite countries: Iran, Russia, and Venezuela. Iran wants to stabilize the oil price at $70-100 a barrel. I think these prices are too low, but probably reflect the absolute minimum price that Iran needs to maintain in order to stop the wheels from falling off its economy if they haven’t already. These lower oil prices are an opportunity for us to both slash our dependence on oil, and to deal a potentially mortal blow to the petro states who are not our friends.

I firmly believe that $140 is MUCH closer to the real price of oil in a global economy with an emerging China, India, plus others. All the players in the oil game have been given an opportunity here which will decide the balance of economic power for the next few decades as we transition away from fossil fuels in general and oil in particular. The decision will come down to who we want to set the price floor. If it is OPEC we will continue to transfer cash to them at an alarming rate. If we take this opportunity to impose a price floor of $70-100 a barrel if not more, we will be in a far better position when the recovery begins than if we let ourselves get readdicted to $60 oil. It seems like OPEC understands this, and the $70-100 price range is also likely to be the best guess at the highest price they can charge without a great deal of concern that the oil importing countries will make a big shift away from oil.

So the race to see who gets to set the highest price is on. If OPEC agrees to set this as their price target, we should set our oil price floor at $100-$150. If OPEC does not agree with this price, then we should set it ourselves because they clearly feel it’s a price that will scare us straight. Whoever is able to set the highest price will win in the end. I’ve said it before and I’ll keep saying it, I would MUCH rather pay my taxes to the Canadian government than to the Iranian government. As soon as more people realize this as well as the other benefits of shifting away from fossil fuels we will begin to see the shaping of a real green revolution.