Chesapeake Energy Corp (CHK)

[LouisDesyjr]

OPEC members and quotas

I mentioned earlier that unless there were big cuts, like around five million barrels per day, I expected the storage to continue to fill up. The problem is that a cartel like OPEC gives each member of the cartel an incentive to cheat. Now as long as there is not too much cheating, everything is still 'good', because the others that stay within the quotas keep the price up. The problem is when they all go to an OPEC meeting and promise one thing, then return home and start selling everything they can in violation of the quotas they agreed to.

Saudi Arabia got sick of all the cheating that was going on in the mid 1980s, and of nonmember states benefiting from the high prices they helped to create by not producing too much. As punishment, back then they started pumping as much as possible to get everyone 'back in line' with quotas, even the nonmember states.

Saudi Arabia is being a little more vicious this time in that they want to bankrupt companies like CHK and won't stop until they do.

Louis J. Desy Jr.