Suppliers vs consumers: game on

Penn : When she shot the intruder, did you see the body?

Mercenary #1 : No, just a shit load of blood, and I figured if you get run over by a train...

[Penn smacks Merc 1 hard] 

Penn : [slow and menacing]  Did... you... see... the body?

Mercenary #1 : I ASSUMED he was DEAD!

Penn : Assumption is the MOTHER of all fuck ups!

The above is a scene from a movie named Under Siege 2, which contains one of the most important words of wisdom I have ever come across and one of the few I have memorised. Because it’s important.

About a month ago, the Prime Minister of Italy, Mario Draghi, former president of the European Central Bank, floated the idea of a consumers’ oil cartel. Prices, Draghi argued, had nothing to do with fundamentals, suggesting the price rally was the result of speculative action that could be countered with a buyers’ cartel.

“The idea is to create a cartel of buyers, or to persuade the big producers, and Opec in particular, to increase production, which is perhaps the preferred path,” Draghi said, as quoted by the FT. “On both paths, there’s a lot of work to do.”

It’s notable that the idea lacked any detail as to how exactly a cartel of buyers could influence OPEC’s policies but luckily, the idea of a buyers’ cartel is not really a new or original one.

Back in 2018, China and India tried to set up a buyers’ cartel to undermine OPEC’s pricing power. The two biggest importers of crude were unhappy with prices and apparently wanted to try a new way of making friends and influencing cartels. It almost worked. Because they had the means to threaten OPEC’s dominance and the name of that means was U.S. shale.