Thursday, May 01, 2008

Batting Zero

In an expedition that MSNBC labeled “Theatre of the Absurd,” Senator Clinton experienced a gas tank fillup and made the following remark, among others,
"I am tired of OPEC setting the price and determining how much supply there is, by any definition that is a monopoly."

Senator Clinton is not exactly renowned for the precision of her statements, but even for her this one is a little loose, and in more than one dimension.

The precise mechanism by which she thinks OPEC sets the price is left unclear by her statement, and would probably be of interest to the New York Mercantile Exchange or the Intercontinental Exchange which are under the impression that they actually set the price of oil. They will probably be a bit surprised to find out that it’s OPEC doing it without their knowledge.

OPEC sets production quotas for its members, but quite a few members get greedy on a regular basis and break those quotas. So OPEC can’t really determine how much OPEC supply there is, let alone how much world supply there is.

When I want the definition of a word I usually go to, and they define “monopoly” as follows,
Exclusive control by one group of the means of producing or selling a commodity or service

As of March 2008, OPEC controlled 35.6% of world oil production. That’s about, um, 65.4% short of a monopoly. In terms of the portion of the market it needs to control it’s about 200% short of a monopoly.

Perhaps she meant to say that OPEC has a monopoly as a supplier of oil to this country.

The largest supplier to this country is, oops, Canada. Last year the second largest was Mexico, but they are in third place this year. Unless Canada and Mexico joined OPEC when nobody was looking, two out of three of the largest suppliers of foreign oil to this country are not members of OPEC.

Here, too, OPEC is about 200% short of a monopoly.

So of the three parts of Senator Clinton’s complaint, precisely zero of them were accurate. Even for her that’s a pretty low batting average.

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