99 CENTS GASOLINE! THE NEW NORMAL!

THE NEW NORMAL IS GOING TO BE  $20.00 A BARREL OF OIL AND GASOLINE AT 99 CENTS A GALLON.  THE 99 CENTS AND DOLLAR STORES HAVE A NEW COMPETITOR  FOR AMERICAN CONSUMER DOLLARS!  WHY?

THE OIL INDUSTRY IS CRYSTALLIZATION OF THE PERFECT DEFLATIONARY STORM.  THE COMBINATION OF OVER-PRODUCTION AND UNDER-CONSUMPTION AND DEFLATIONARY DOWNWARD PRESSURE ON ALL COMMODITIES.

OIL HAS MET ITS WATERLOO IN 2015.  FIRST, OVERPRODUCTION FROM OPEC COUNTRIES AND AMERICAN SHALE HAS CREATED PRODUCERS TRYING TO CATCH FALLING PRICES. 

 THE OVER-PRODUCTION IS A NATURAL REACTION TO MONOPOLY PRICING.  OPEC IS AN UNREGULATED MONOPOLIST WHO  DOES NOT  CHARGE THE HIGHEST PRICE THAT THEY CAN GET BUT OPEC CHARGES THE HIGHEST PRICE THAT IS CONSISTENT WITH MAXIMIZING THEIR PROFITS.

OPEC PROFITS ARE RELATIVELY HIGH AND GIVEN OTHER COMPETITORS CAUSE THE ATC CURVE TO RISE WHERE EARNING A SMALL PROFIT IS THE ONLY SOLUTION. OPEC CAN EARN LESS THAN A NORMAL PROFIT AND STILL STAY IN BUSINESS: SO THAT LONG TERM THE ISSUE IS STAYING IN BUSINESS AT A NORMAL PROFIT.

THIS IS NOT A SUPPLY EVENT BUT A UNREGULATED MONOPOLY EVENT!  WHAT IS THE REAL PROBLEM WITH OPEC:

1. OPEC CONTROL OF THE OIL INDUSTRY ACTUALLY MISALLOCATES WORLDWIDE RESOURCES. OPEC CAN REDUCE OUTPUT AND INCREASE PRICE TO CREATE AN INPUT MISALLOCATION OF WORLD RESOURCES.  THE IMAGE OF GLOBAL ECONOMY DEPENDENT ON MISALLOCATION OF RESOURCES VIA OPEC MONOPOLY IS THE REAL PROBLEM.

2. THE FACT THAT THE GDP OF OPEC NATIONS CREATES INTERNAL INCOME INEQUALITY AND EXTERNAL INEQUALITY WITH OTHER NATIONS.  SAUDI ARABIA HAS A LOW GDP THAN SPAIN.  OPEC HAS INHERENTLY CREATED POLITICAL INSTABILITY IN GLOBAL ECONOMY.  THE SUPERNORMAL PROFITS ARE ABNORMAL AND CREATES SOCIAL AND ECONOMIC INEQUALITY.  THEY ARE BAD ROLE MODELS FOR THE WORLD ECONOMY.

3. OPEC HAS CREATED A DYSFUNCTIONAL ECONOMIES BASED ON LACK OF INCENTIVES FOR EFFICIENCY AND PROGRESS.  OPEC CANNOT MEET CONSUMER NEEDS AND RETARDS ECONOMIC PROGRESS.  THE INCREASE OF OBSOLESCENCE RATE INCREASES WITH THEIR AGING EQUIPMENT.  THE SHOCK TO THE WORLD ECONOMY IS THAT OPEC MODEL NO LONGER WORKS AND IS INHERENTLY ABNORMAL.  THE FACT THAT WORLD ECONOMY HAS INTEGRATED A DYSFUNCTIONAL MODEL AND CREATED A MONOPOLY FICTION IN THE REAL REASON FOR THE GLOBAL ECONOMY SHOCK!

4. OPEC USES PRICE DISCRIMINATION TO CONTROL REVENUES BY SEGMENTING THE MARKET INTO SUBMARKETS AND  THIS LEADS TO DUMPING OF OIL ON THE WORLD MARKET.   OPEC IS USING MARKET SEGMENTATION BASED ON THE COMPETITION OF AMERICAN AND OTHER PRODUCERS.  THE IMPACT IS TO DESTROY THE COMPETITION BY OIL DUMPING.

5. OPEC IS USING MARKET SEALING TO CONTROL THE MARKET.  OPEC IS SEALING ITS COMPETITOR MARKET BY NOT ALLOWING RESALE OF ITS OIL PRODUCTS TO NON-OPEC MEMBERS.  OPEC WILL ALLOW A CERTAIN AMOUNT OF LEAKAGE TO CONTROL THE MARKET SEGMENTATION.