Today, CNBC provided an example of why the public has been led so far astray when we are informed by the media about oil and its market structure.
Sharon Epperson, CNBC's oil market specialist, went on the network this morning to report on the price of oil. She advised that the price had inched up another dollar and went on to report that OPEC was considering further production cuts to be determined at OPEC's next meeting.
Then, she provided a key insight into the media mindset that has vastly empowered the oil producers. Epperson advised that according to a report by the International Energy Agency (IEA), OPEC compliance to their previously announced cuts has been but 83%. Then Epperson goes on to comment, "Therefore OPEC has an incentive to deliver on the 'promised' production cutbacks."
And that's the rub -- the use of the word "promised" in place of the word "threatened." It seems like a small detail, but it exposes an important media predilection, all too frequently putting oil patch extortion in the best possible light. It was forever manifest in oil's run-up to $147/bbl and seemingly refuses to go away.
As to another view on the current structure of oil prices, please check out "Why Are We Paying $50 a Barrel for $20 Barrel Oil??" (04.27.09).