Someone on MSNBC said that the "market" sets oil prices. Is that true? Isn't it OPEC, a cartel?

[CTyankee]

I hear repubs say this all the time. I am confused. Doesn't OPEC just decide what the price will be and that's that? Where does the "market" come into this equation?

Help me out here....

[stellanoir]

1. duh

[dchill]

2. Actually, speculators...

have driven the price of OIL FUTURES to a higher price. That is the "market" that is determining the price.

[Junkdrawer]

6. Yet another point of irony:

Oil speculation is now becoming such a source of income that The Market worries if the price of oil looks like it will fall.

Mommy, I woke up in Bizzaro World. How do I get back home?

[Zynx]

7. Indeed. Fundamentals don't support oil where it is, but traders are greedy so there it is.

[John Q. Citizen]

3. OPEC sets production targets and certain policy among it's members. But oil is traded

publicly, and the price is dependent on what people will pay.

[Recursion]

4. something like 35% of oil comes from OPEC countries

OPEC can throw some weight around, but essentially they're stalemated with Russia, who together with its client states produces an almost equal amount. Then comes Norway, Canada, and us. This isn't the monopoly situation it was 30 years ago.

[Zynx]

9. Brazil and China have also been rapidly expanding production.

Between them they produce about 5.5 million barrels a day.

[Kelvin Mace]

5. It is amazing that grown men

actually believe this nonsense. I mean I stopped believing in fairy tales around six or seven.

(and I am not referring to the poster, just the idiots on MSNBC).

[Zynx]

8. No. OPEC manipulates production up and down to bring prices into a range they want

but they cannot really mandate the price as such. In theory they can, but they adjust their supplies and let futures traders take it from there.

[HawkerHurricane]

10. And the Saudi's control OPEC.

[aint_no_life_nowhere]

11. What is the role of the dollar's value in determining the cost of oil?

I thought that part of the factor in the rise of the price of oil was due to the fallen dollar and it's diminution in buying power, especially on an international level. Am I mistaken about that? If we had a much stronger dollar, would the price of oil still be the same as it is now?

[DBoon]

12. A monopoly is one type of market

Markets may be regulated and still remain markets to a point.

So the statement is technically true, but dodges the issue that markets are made up of people acting in an institutional framework that includes politics.

Just because it is set by a market doesn't mean it is fair, or that it is wrong to influence the price in a way that benefits you as a consumer.

You know damn well that nations and large corporations are doing just the same to support their interests.

[BlooInBloo]

13. They can both be true.

[Mike03]

14. I have no clue; hopefully the answer will come from some other DUers.

Some people say it's the lack of refinery capacity in the U.S., and others make an equally convincing argument that prices are set by Middle Eastern output and OPEC.