Oil cartel OPEC is doing Australian households a enormous favour. It is incapable of behaving like a cartel.
Its members so desperately need to have the funds that they have been ignoring production targets set by the organisation, aimed at stabilising the worldwide marketplace and raising costs.
OPEC members have been ignoring their own targets for 18 months and the result is an oil price tag that has plunged to six-year lows in Asia, and it is not likely to finish any time quickly.
The oil cartel, which accounts for roughly 40 per cent of the world’s production and supplies most of Asia, remains in disarray.
It threw in the towel on Friday, deciding to abandon production limits, which is just a single really optimistic improvement for oil consumers.
Iran, for so long under sanctions connected to its nuclear plan, has promised to lift production to four million barrels a day by the finish of next year.
That is an boost of 20 per cent from existing levels.
It is challenging to see how OPEC can lift oil prices when adhering to production limits carries its personal risks.
If OPEC cuts production and costs go up, it increases the viability of US shale oil producers, so cutting production will not operate.
Oil price tag drop not totally passed onto buyers
This is all great news for families and motorists in the lead-up to Christmas, as reduced petrol costs will free up some earnings to invest on other items.
Oil businesses know consumers will not complain about pump prices as extended as they see them fall.
But motorists should be complaining due to the fact, just like banks which fail to pass on a complete cut in official interest rates, the oil firms are holding onto a larger share of the advantage.
Retail margins at the petrol pump have gone up and are the highest they have been at any time during the previous year.
FuelTRAC fuel analyst Geoff Trotter said “15 years ago oil businesses claimed the retail margin was two cents a litre”.
“Now it is far more than 20 cents a litre.”
The margins are even wider for diesel fuel.
Subjects: oil-and-gas, company-economics-and-finance, trade, community-and-society, australia