Thread by @anasalhajji

Thread on #oil, #OPEC, and #India

1- For a policy or a plan to succeed, the focus must be on what is under control, not on things that are controlled by others or cannot be controlled.
#OOTT
2- Even non-competitive models in economics focus on quantity, not on prices.

3- Historically, OPEC tried to control quantities & prices at once. It failed miserably.

4- One of the reasons for the success of OPEC+ in recent years is the focus on what they control only & that was production.
#Oil

5- #Texas Railroad Commission focused on quantities only when it rationed production. It succeeded according to many researchers.

6- The complete failure happened when the Texas Railroad Commission stopped controlling production and the US government imposed PRICE controls

7- US government PRICE controls in the 1970s wreaked havoc on the domestic and international oil and gas industry. At the same time, they ruined the US economy. One of the dark spots in US history was the adoption of communist ideas to regulate the energy markets

8- Lessons from the above are clear: #India's proposal to oil producers to get fixed prices is a disaster in the making. India is better off focusing on security of supply, negotiating in good faith, but avoiding fixed prices. Fixed prices will blow up in the face of everyone.

9- In fact, the proposal for fixed oil & LNG prices contradicts the current government's stands on markets. It cannot focus on free markets, liberalization, sale of government-owned enterprises to the private sector, then ask for a government chosen fixed price. #OOTT #LNG

10- What will happen when spot prices are significantly lower than fixed prices?

History tells us that Indian companies claimed Force Majuer to get rid of the long-term contracts & started buying from the spot market. Now they want contracts because contracts are cheaper.

11- So why producers will agree to a fixed price knowing that Indian companies will do exactly what they have done historically: find ways to do away with these long-term contracts and buy from the spot market?
Those who cannot be trusted cannot talk about trust!

12- Why producers will agree to a fixed price knowing that with higher prices than the fixed price, Indian refineries will buy the cheap oil and EXPORT products at world prices? NON ONE IN HIS RIGHT MIND LEAVES MONEY ON THE TABLE!

13- Indian officials complained every time oil prices increased, regardless of the price level. They complained when prices were $50/b & when prices were $80/b. Being a large consumer comes with certain privileges, but certainly not the way Indian officials understand them.

14- Side comment regarding #5 above: When the Seven Sisters controlled the Global oil market, they also focused on quantity and did not FIX prices. The so-called "posted price" was for tax purposes paid to the host countries, but that was not the market price.
#OOTT #Oil #LNG

Correction: No one in his...