Tuesday, March 21, 2017

Oil caught in fallacy of composition

There is no good price for oil. If high, economy slows and demand drops. If low, individual producers increase production to keep cash flowing, driving price below cost.

Why can't voluntary production cuts work? Two reasons.

1. No one wants to volunteer to lose money selling oil under cost.

2. Oil is the fuel of transport and sprawl, the essence of consumer capitalism. Trillions in infrastructure is dependent, and there is no easy substitute. Price hikes needed by producers trickle through the entire economy.

So the obvious solution is to get off oil.

But capitalism won't do it, can't do it. Because of its competitive nature, it will exploit any profit seam until collapse.