Oil market conspiracy theories originate from non-economists

Omar Al-Ubaydli
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Few topics get Western journalists as hot under the collar as OPEC. When they grab their keyboards, they often produce conspiracy theories that read like rants by Morpheus from the Matrix. A key reason for these vivid imaginations is that people with no economics training insist on opining on the essentially economics matter that is OPEC’s policy.

OPEC’s role has evolved considerably since its inception in the 1970s, but today, it is clear what the bloc is trying to achieve, in conjunction with the non-OPEC countries that comprise OPEC+: it wants to stabilize oil prices by managing global supplies.

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The reason why this is clear is that this is repeated ad nauseum in every press release and interview associated with an OPEC meeting. Moreover, their actions are consistent with their claims: when oil prices rise sharply, or oil demand is set to skyrocket, they loosen the spigots; and when prices collapse, or demand looks set to shrink, they scale back production. Studies have shown that OPEC’s actions result in a decrease in the volatility of the price of oil.

Moreover, the credibility of this narrative is reinforced by the fact that it serves the member states’ interests. Oil investments take many years to be bear fruit, and they are very expensive. If oil prices gyrate, then oil producers will rationally be reluctant to invest. The organic decay in the production of oil fields will therefore result in rising prices, which eventually incentives oil investment, thereby leading to falling prices 5 years later. The result is high amplitude price cycles.

These uncertainty-induced price rollercoasters damage both producers and consumers of oil, and they can be avoided to a large extent if producers coordinate in the manner that OPEC+ presently favors.

This dull – albeit accurate – description is unsatisfying to many Western journalists, whose job it is to attract readers. For the ones who cover energy markets on a regular basis for the business sections of newspapers, they can’t get too carried away in the pursuit of clickbait, as they have personal and institutional reputations to protect. For the most part, they stick to describing the facts and quoting the key individuals, resulting in informative if somewhat dry journalism.

These principles do not apply to the opinion pages, however, which are closer to being the Wild West of journalistic content. They will often be written by non-journalists, or by journalists who specialize in providing thought-provoking opinions that attract readers.

OPEC-related op-eds contain some particularly far-fetched explanations for the generally mundane actions taken by the bloc. The conspiracy theories often involve bringing geopolitics into the situation. Western writers will often claim that OPEC is trying to get Donald Trump reelected, or to support Russia in its war with Ukraine, or to bankrupt shale oil producers through dumping, and so on. The unifying thread in all these merry tales is their refusal to argue that OPEC is trying to stabilize oil prices by managing global oil supplies, and they achieve this by deploying a variety of intellectual contortions.

I recently gathered some data that helped me understand one of the factors contributing to the vivid imaginations on display. In the 13 years from 2010-2022, the New York Times published 74 op-eds that mentioned the word “OPEC”. Among those, I could find 47 where I could check the educational background of the author(s) via LinkedIn. In fewer than 10% of these op-eds, at least one of the authors had a tertiary degree in economics. In all those cases, the article was free of conspiracy theories, sticking with bland economic analysis.

The remainder were written by people with degrees in international relations, Middle Eastern studies, journalism, history, English, and other subjects that are not even adjacent to economics. Moreover, these were the articles that contained the zany stories about skullduggery in the halls of OPEC’s Vienna headquarters.
It could be that the interdisciplinary nature of these op-ed contributors alerts them to conspiracies that an economist staying in their lane might not spot. Alternatively, they could just be out of their depth, in the same way that waves of armchair epidemiologists tortured us with their opinions on how to manage the Covid pandemic.

Every intellectual discipline has its blind spots and can benefit from the opinions of those working in other fields. However, sometimes, if it looks like a duck, quacks like a duck, and swims like a duck, it probably is a duck, and that principle seems to apply to OPEC.

The solution doesn’t lie in forcing unwilling op-ed writers to enroll in remedial economics classes; it’s in economists learning to write better op-eds that convey the truth in a manner that attracts readers. Until that happens, expect geopolitical fantasies to continue dominating the narrative on OPEC.

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