The economics of oil

In the past 40 years, the world’s population has grown from four billion to seven billion, the number of vehicles in the world has quadrupled, and the Chinese economy has risen from its slumber. All these trends have caused global oil demand to spike from 55 million barrels a day in 1973 to 88 million barrels a day today. Although the United States and other non-OPEC producers have been increasing their production, OPEC, which holds some three-quarters of the world’s conventional oil reserves and has the lowest per-barrel production costs in the world, produces today the exact amount of oil it did four decades ago: 30 million barrels a day, accounting for about a third of global supply. In other words, OPEC deliberately produces much less oil than its reported reserves would allow in order to keep prices higher than they would otherwise be.

via Gal Luft and Anne Korin | How America Misunderstood the 1973 Oil Embargo | Foreign Affairs.