For more than a century, the oil market has been split into two categories.
Some oil drillers produce as much oil as they can, as fast as they can. For financial or geological reasons, these smaller drillers don’t have the ability to increase or decrease their oil flow. As long as they’re turning a profit, they pump oil and then they sell it. But a few companies or countries can form a cartel and sit on so much oil that they have what’s called “spare capacity,” which is the ability to produce more oil at will at any time. By turning their oil faucet all the way on, this spare producer can flood the market with so much oil that other drillers struggle or go out of business. By turning it off, they send oil prices soaring.
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For more than a century, the oil market has been split into two categories.
Some oil drillers produce as much oil as they can, as fast as they can. For financial or geological reasons, these smaller drillers don’t have the ability to increase or decrease their oil flow. As long as they’re turning a profit, they pump oil and then they sell it. But a few companies or countries can form a cartel and sit on so much oil that they have what’s called “spare capacity,” which is the ability to produce more oil at will at any time. By turning their oil faucet all the way on, this spare producer can flood the market with so much oil that other drillers struggle or go out of business. By turning it off, they send oil prices soaring.