‘Goldilocks’ and the fantasy about the ‘fair price’ of oil

In 1969, the Shah of Iran, visiting Washington for Eisenhower’s funeral, offered to sell the United States a million barrels of oil per day for 10 years at US$1 per barrel. The Americans found the price too high, and turned the offer down. By 1974, with the first oil shock underway, oil was selling for $12. Arguments about a “fair oil price” have continued ever since.

But is this idea of fairness even meaningful? What is a “fair” price for oil, acceptable to both buyers and sellers? Could the world agree on such a price?

This concept of fairness is an interesting one. We do not often talk about the fair price of a Porsche, a mobile phone or a Starbucks coffee. It is accepted that these items are priced in a competitive market, and we are free to buy, or not, as we choose.