Publications: Notes at the Margin

The Gamble (November 21, 2016)


OPEC’s November 30 meeting represents a gamble, possibly the most important gamble taken yet in the twenty-first century. In our view, the oil producers attempting to orchestrate a cut in global production are taking a risk even greater than the one Hank Paulson, Ben Bernanke, and President George W. Bush took when they stepped in to save the global economy in 2008. Oil producers and oil-producing companies could achieve a huge win if they succeed in cutting production and the cut raises prices, increases investment, and does not substantially boost non-OPEC output if—and this is the big uncertainty—global demand continues to rise. On the other hand, oil producers could lay the foundation for one of worst financial collapses we have seen should a successful agreement lead to price increases, higher investment, and dramatic increases in non-OPEC production and occurs as growth in global oil demand slows to a crawl or begins to decline.


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