Summary:
OPEC decides to cut its supply by 1 million barrels per day, the possible effects of such a cut would be devastating.
As crude oil being a vital primary good in manufacturing, transportation, electricity production and heating; worldwide cartels such as OPEC (Organisation of Petroleum Exporting Countries) hold great power over the world's economies. Due to the fact that crude oil has low price and supply elasticity yet high cross and positive income elasticity in the short-run; cartels can increase the price or cut the supply (which will end up in an increase in the price) freely, only under the risk of suppliers outside the cartel. To keep the petroleum prices in the range of $22 to $28 a barrel, the Organisation of Petroleum Exporting Countries is planning to cut the supply of petroleum by 1 million barrels per day. Such an act may result in only one way in the short-run but two ways in the long-run......
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