Publications: Notes at the Margin

OPEC's Messaging Problem (July 24, 2023)


Suppose Jerome Powell or Christine Lagarde were OPEC+’s primary decision-makers and suppose that oil markets were managed using the approach central banks use today in their actions and in informing market participants. Crude oil prices would likely be twenty or thirty percent higher if this were the case. Global crude oil inventories would also be higher because the trader and refiner buyers believed prices were unlikely to decline. In addition, a “market friendlier” approach by OPEC+ (and the major oil firms) could engender respect rather than ire and create a sense of stability and rationality that might further stabilize prices, reduce uncertainty, and slow the headlong rush to abandon fossil fuels.


Instead, OPEC and OPEC+’s current managers have followed the example of the disgraced Federal Reserve chairman Alan Greenspan, whose mismanagement of monetary policy led to the Great Recession.


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