Discussion in 'Economics' started by jsimmons, Apr 2, 2006.
it isn't "fixing" prices in the sense of cartels.
He is offering a long-term supply contract---a completely legitimate thing to do.
I would take him on the offer. The problem of course is political risk---if spot prices go to $100 will Venezuela still honor the agreement?
Like when various California customers took out electricity supply contracts with Enron etc at a certain price (above spot price then), and then Enron welched on the deal when the spot price shot up due to their manipulation.
So the customers were left to buy electricity from somebody else at the last minute at a high price, and only possible remedy (in our hypercapitalist lawyer system) was to sue Enron. Look how well that worked out.
I agree that there would be a great deal of political risk in contracting with them for "guaranteed" oil at $50/barrel, since there is no middleman involved; this is exactly the reason that futures contracts exist (more specifically the clearing structure).
Just so he can score "moral points" to boost his popularity.
Would a corporation purposely underprice a commodity product it is selling so that it's stock investors can get a "warm fuzzy feeling" that they are helping out society? The stock investors would drive out the management the next time there was elections, that is what would happen.
If oil prices skyrocket, the locals will probably get angry about all the "lost revenue" because of the underpricing.
At least he isn't funding terrorism: US says Saudi individuals still funding terrorism
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