|SNow look briefly at crude oil supply. Non-OPEC producers generally produce at
maximum capability, and we see production has been increasing since the early
|SOPEC, on other hand, adjusts its production in
an attempt to maintain prices in the face of varying demand and non-OPEC
|–In the late 1970’s and early 1980’s, the large
crude oil price increase was accompanied with large demand declines. In addition both the North Sea and Alaskan
North Slope were showing large increases in production.
|–OPEC reduced its production to keep prices
from plunging too far in the face of falling
demand and increasing non-OPEC supply.
|–As demand began increasing again, OPEC was
able to increase its supply.
most recent years, you can see OPEC decreasing production in 2001 and
2002, maintaining prices around the $30 level. But last year and this year, production has
increased in spite of the temporary loss of Venezuelan crude oil supplies in early 2003 and the Iraq war.