OPEC tries to reassert control of the oil market
Washington Post:
What the Trump administration should do is hasten the conversion of US refineries to the processing of the light crude produced by the shale wells. This would eliminate the need for importing heavy crude from OPEC countries. This conversion process has been hampered by the ridiculous requirement that the refiners purchase expensive "RINs" which are nonproductive expenditures tied to the worthless ethanol industry. Ethanol was originally sold as a way to reduce imports, but now it is having the opposite effect. Iowa politicians are intent on protecting the boondoggle while that state actually uses less ethanol than most other states.
The fact is that if ethanol were a valuable product it would not need a mandate that anyone purchase it. Unfortunately, during the campaign, Trump promised to protect the industry and is looking for a way to please Iowa farmers. That is too bad because by doing so the US is less competitive with OPEC.
Trump blasts OPEC, accusing the oil cartel of ‘artificially’ raising prices: ‘No good and will not be accepted!’Restricting the supply of oil to maintain profitable pricing has a long history. Before there was OPEC there was the Texas Railroad Commission which gave producers a production allotment to avoid overproduction. OPEC took those measures to an extreme and added political considerations to the pricing. Until the oil glut of a few years ago, Russia was a free rider on this system. The Russians have since become an unofficial member of OPEC in an attempt to control the price of oil. The cartel still has to deal with the fact that the US production has removed their biggest customer.
The Organization of the Petroleum Exporting Countries is operating under a joint agreement with Russia, an oil-exporting country that is a not an OPEC member, to regulate global supplies.
What the Trump administration should do is hasten the conversion of US refineries to the processing of the light crude produced by the shale wells. This would eliminate the need for importing heavy crude from OPEC countries. This conversion process has been hampered by the ridiculous requirement that the refiners purchase expensive "RINs" which are nonproductive expenditures tied to the worthless ethanol industry. Ethanol was originally sold as a way to reduce imports, but now it is having the opposite effect. Iowa politicians are intent on protecting the boondoggle while that state actually uses less ethanol than most other states.
The fact is that if ethanol were a valuable product it would not need a mandate that anyone purchase it. Unfortunately, during the campaign, Trump promised to protect the industry and is looking for a way to please Iowa farmers. That is too bad because by doing so the US is less competitive with OPEC.
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