Wednesday, December 17, 2008

OPEC Spoke and Nobody Cared

So, yesterday I filled up my tank for $1.39 a gallon. It was a delicious experience to say the least. Filling a tank for under $20... Oh yes, I was going somewhere with this.

OPEC just recently announced that they will be cutting production by 2.2 million barrels per day, a 3% decrease in total oil production (Wall Street Journal). This is an attempt to buffer the price of oil and keep it from falling any further as demand slides with the recession. However, oil traders are unimpressed with this announcement as oil continues to drop in price. This is because this is the third production cut that OPEC has announced since September, which makes the total barrels per day cut somewhere around 4.4 million. These cuts haven't seemed to actually have happened though, further dragging OPEC's reputation through the mud.

This shows a great intangible benefit of Corporations that should never be underestimated, reputation. When a company has a good reputation, people pay attention when they make statements and are more likely to take them as fact. Take Office Depot, for example. Office Depot has been leading the charge for big business to become environmentally friendly. When they posted that they managed a 10.1% absolute reduction to carbon emissions while increasing their square footage by 17000 in a year no one cried foul or scoffed disbelievingly at the study. This can be attributed to the fact that Office Depot has made sure to back up their claims by providing proof of their endeavors. This increases their credibility, making it easier for people to accept things they say.

Now take a look at OPEC, who has nations that greedily safeguard the numbers of their earnings and production levels from even the other nations. With such secrecy it becomes difficult for consumers to take what the corporation says seriously. With their reputation in shambles, any announcement OPEC makes will most likely be met with scoffs and inaction until the consumer actually sees some change in the production levels themselves. As such, even with impressive market share, oil will continue to slide in price until at least Jan. 1, the day that the production cut is supposed to begin.

1 comment:

Anonymous said...

"Now take a look at OPEC, who has nations that greedily safeguard the numbers of their earnings and production levels from even the other nations."

Greedily? That's cute, but let me remind you that entire world's economy is based on greed. Even your decision to get a college degree is based on greed to make more money later in your life.
And at least OPEC don't invade other nations "greedily" for the sake of other nation's oil.