OPEC's economic blackmail?

The oil producing countries, OPEC, are obviously starting to get nervous about their future prospects, as a mix of the green agenda and a desire for energy security take hold in the West. This story on the BBC caught my eye. The secretary general of OPEC has said that investment in biofuels could push oil prices "through the roof". His argument is that OPEC would reduce investment in new production and this would push prices up as there would be a squeeze on supply.

All in all, it's hard to think of a dafter argument from OPEC. If demand started to decrease for oil, then it is hard to imagine any sane country (and that is obviously a priviso that needs to be included with OPEC countries) holding back production to a future date when demand, and therefore price, is likely to be even less. Furthermore, a simple application of Porter's five forces analysis, which any business studies student would be familiar with, implies that the threat from substitution and the increased bargaining power of the customer (due to falling demand) would increase the rivalry within the oil production industry and the temptation for each member to pump as much as they could while the going was good. Despite OPEC's public face espousing quotas, the reality has always been that its members cheat as much as they can. One wonders whether OPEC could survive a shrinking oil market as it became every member for themselves.

For years, the Saudis have sought to keep oil prices at a level where they could milk the West for every penny they could get without pushing prices high enough for us to look elsewhere, particularly to renewables and nuclear, for our energy sources. It has been an interesting confluence of events, rising oil price due to Middle East instability and the rise of China, growing concerns in the US and Europe over energy security, rising trade imbalances and worries over global warming that have finally broken their hold. And frankly that's a good thing. And if oil prices were to go up if we move to biofuels, then that's good too. It would just speed up the process of getting away from a carbon economy and stop the backsliders.