Energy - The Challenges and Opportunities Before the Developing Countries*

Abstract

We are meeting here at a time when oil prices have not only become soft, but unstable. OPEC's control over the market has been decisively broken by a combination of rising non-OPEC supply and flat demand, which is itself a fruit of the bursts of technological innovation that followed the first and second oil shocks. Many people throughout the world who should know better are quietly rejoicing at the change. They opposed OPEC in principle because cartelization and price fixing are gross interventions in the operation of the free market. I can understand this view and sympathize with it. But I fear that, today, the countervailing power that was used to break OPEC may be exercised so crudely that prices will be driven down with a blind disregard for the future--specifically for the fact that oil is a part of nature's capital stock, and not its annual output.