The argument for increasing oil production in the U.S. to
decrease gas prices at the pump has sparked passionate debate,
but it undervalues the influence of the Organization of
Petroleum Exporting Countries (OPEC). In recent years, OPEC has
shown an ability to manipulate the price of oil around the
world, making it unlikely for an increase in U.S. oil production
to reduce gas prices. However, this unfortunate fact has a
silver lining: OPEC's need to sustain its market base and hold
off the alternative energy industry is likely to keep oil prices
from skyrocketing. Two factors tend to be ignored in the
discussion on gas pricing. First, oil markets do not behave as
other commodity markets do, such as corn or soybeans. The world
market for oil uniquely involves the OPEC cartel controlling the
world supply of oil and thus controlling the price of oil by
increasing or decreasing production. (During internal quota
negotiations in 2008, OPEC members clashed on whether to adjust
production to increase prices or just