Economics: Opec - A King For A Day, A Fool For A Life

 (Drivebycuriosity) - Oil prices are on a tear recently. Since December the price for Brent Crude, the gauge for the global oil market, jumped almost 50%. The rally was caused by Opec. The cartell wants to hike the oil price to the 80s and higher as it was last summer. Saudi Arabia and their accomplices continue their supply cuts even though the Iran sanctions and the crisis in Venezuela are curbing the supply of oil already.

Opec´s strategy reminds me of an old saying: "A king for day, a fool for a life". The cartel might be successful for the time being, but high & climbing oil price will cause more demand destruction which will lead to lower prices in the future. Oil is already too expensive for the sluggish economics in the US & Europe. In the US, the by far biggest user of oil,, the demand for gasoline is shrinking, at least per capita (chart below). Americans seem to be less obsessed with cars & driving and cars are getting more fuel efficient over the time. This trend could accelerate because electric care are getting more popular.

China, the world's largest auto market, is working on a plan to ban the production and sale of vehicles powered solely by fossil fuels. Bejing has already announced that any automaker producing or importing more than 30,000 cars in China must ensure 10 percent of them are all-electric, plug-in hybrid, or hydrogen-powered by 2019. That number should rise to 12 percent in 2020 (cnn  bloomberg). Germany, France, UK and other countries want also get rid of fuel driven engines. So in some years the global demand for gasoline will shrink dramatically. The falling  demand for oil could end Opec`s regime soon.