by the Economist

About the author: The Economist is a weekly newspaper on political, literary, and business events.

How much is a barrel of oil worth? In the Middle East, reserves can cost barely a dollar to lift out of the ground. Add a decent profit margin, and you still have an exceedingly modest price. Yet quite a bit of the world’s oil comes from far more expensive places. In 2000, the price averaged $27 a barrel.

OPEC’s Whims

It is not geology that determines the oil price, however, still less the free interplay of supply and demand. Mostly, it is the whims of the Organisation of Petroleum Exporting Countries (OPEC), the ill-disciplined cartel led by Saudi Arabia. Small wonder, then, that the price of oil yo-yoed from...