July 03, 2013
The WSJ told readers that people in the United States are much better off today because of increased North American oil production, which it claims has led to more stability in world oil prices. It contrasts the current situation to the instability of 8 years ago:
“The group, made up of business executives, former diplomats and retired military leaders, hosted “Oil ShockWave” simulations, inviting former senior policy makers to role-play responses to hypothetical oil-market disruptions. Former Treasury Secretary Robert Rubin played the part of the president’s national-security adviser in a 2007 simulation in which unrest closed a pipeline linking the Caspian and Mediterranean seas while Venezuela and Iran cut output to protest sanctions on Iran, sending global oil prices soaring.”
In 2007 the world price of oil averaged around $65 a barrel in current dollars. It is currently over $90. If we had been willing to push oil prices 40 percent higher back in 2007, there would have been much less risk of price spike due to an interruption of supply. It’s unlikely that many people would consider the higher prices of today a good trade-off for greater price stability, even if in fact the market is more stable going forward, as the article asserts.
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