Rafi Mohammed

Falling Prices Don't Make OPEC Irrelevant

Posted on December 11th, 2014 (1 Comments)

Boy, I never thought we’d see gasoline prices drop to $2.50 a gallon again…for some reason, when I fill up these days it’s with a smirk of satisfaction on my face.

With oil prices collapsing, it’s easy to breathe a sigh of relief and think OPEC’s stranglehold is over. My latest piece for the Harvard Business Review discusses a little known strategy employed by cartels. The common thought is collusion leads to higher prices. This piece argues that especially in high fixed cost industries, it may be a profitable detour to higher prices. So enjoy the cheap gas but I’d hold off purchasing that gas guzzler…as higher prices are on the horizon.

As always, thank you for reading, Apologies for the recent writing breather – regular blogs are back!

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Readers' Comments on This Blog Entry

From Ben on December 15th, 2014
It always amazes me of the 'amnesia' the general public has regarding the price of oil and cost at the pump. Do they realize or forget when they were paying close to $5/gallon @ $140/barrel oil...are they silly enough to think oil will stay at the current depressed price. I have seen the cycle in my short life to know that oil will continue to be dictated by OPEC...it is purely based on supply and demand...if they have 40% of the supply...they have the power to control the price. I really like your concept of 'bully pricing' can you elaborate more on it? Thanks! Ben Deal 415-779-2236