3
$\begingroup$

I have been wondering. With OPEC driving down the price of oil in order to stifle the growth of the American oil industry, what can we do about it?

More specifically, why don't these oil producers simply store the oil that is produced for more than the current per barrel selling rate and then sell the stored oil later when the price inevitably rises once more?

I understand that many companies have to keep pumping the oil to retain land rights. But I don't see why we can't get around that by pumping it and then storing it somewhere. Preferably on land and in facilities that are already owned. Then when the price goes into the profitable zone you reduce the volume you are pumping out of the ground and replace the output with the stored oil.

Also, I read that Saudi Arabia is cutting oil production. But that OPEC has taken actions to drive down the cost of oil. Yet I would think that overwhelming the market with supply would be how they drive down prices. So I am confused as to how the production cutting is working.

Any thoughts or information?

Improve this question
$\endgroup$
8
  • 1
    $\begingroup$ storing it somewhere That is the catch. Building storage takes time and is costly. And storage space is limited, considering nobody expected the boom in fracking. Where did you read this read that Saudi Arabia is cutting oil production ? I read they aren't cutting down their production. $\endgroup$ – DumbCoder Dec 16 '14 at 8:57
  • 1
    $\begingroup$ OPEC driving the prices of oil down, that cannot be farther from the truth. The rise in US production is and OPEC is helping by not cutting their production levels. $\endgroup$ – DumbCoder Dec 16 '14 at 9:00
  • 1
    $\begingroup$ Who is this "we" in "what can we do about it?" . And what are you asking - are you interested in the microeconomics of contango, the macroeconomic implications of oil price, the impact of the OPEC cartel on the production function, or the relationship between financial markets and the oil industry? $\endgroup$ – 410 gone Dec 16 '14 at 12:08
  • 1
    $\begingroup$ That's very very broad - way too broad to handle in the handful of paragraphs that forms a good answer here. Lots of books get written on the subject. At the moment, the question reads like an open invitation to discussion of the oil markets, which isn't a good fit for the site. Can you narrow it down just to one specific angle - from your interest in storage, I guess contango could be the focus: it has received rather a lot of media attention very recently $\endgroup$ – 410 gone Dec 16 '14 at 15:44
  • 1
    $\begingroup$ OK, I will think it through more and edit the question. $\endgroup$ – Patrick Dec 16 '14 at 19:04