Is OPEC Lowering Prices to Hurt Alternative Fuels?

It appears that the conspiracy theorists are at it again, this time claiming that the Organization for Petroleum Exporting Countries (OPEC) has a vested interest in keeping oil prices relatively low as a way to thwart money leaving oil and going towards new alternative fuels.

According to Fox News, part of the reasoning behind OPEC’s decision to allow crude oil prices to fall to $60 per barrel before discussing production cuts was to help sabotage alternative fuels, such as E85 Ethanol:

“OPEC’s cut also signaled that it would defend a price of about $60 a barrel, high enough to justify its investment in future production capacity but low enough to allow economic growth and deter a flood of alternative fuels.”

In a press release by the National Ethanol Vehicle Coalition (NEVC), Curtis Donaldson, Charman of NEVC, stated, “OPEC feels that they can manage the price of gasoline to a point where increasing the production of E85 and providing it at more locations across the country will become less attractive.  It will be disappointing if we allow this to happen when everyone knows, now more than ever, we need more energy independence.”

Unfortunately for those looking for a good conspiracy, you’re probably going to have to look elsewhere, as oil and gasoline really isn’t threatened by ethanol.  At last count, there were over 175,000 regular gas stations in the United States, compared to only 1,000 E85 Ethanol stations, and the only place where Ethanol is a mainstream fuel is in Brazil.

It appears the main reason for OPEC allowing gas and oil prices to fall so far is because they realized there was a lot of fluff in the price and, more importantly, it realized there could very likely be severe world wide economic consequences if oil continued to push $80 per barrel.

In a world wide recession, oil consumption drastically goes down and OPEC would ultimately lose money.

So, while limiting the growth of alternative fuels MAY have played into OPEC’s decision, it certainly didn’t play a very large role.

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