Negotiating Oil Prices
My brother-in-law recently asked for my advice about a major purchase – a piano. He was buying from a private seller, and wanted to know if I had any tips on how he could bring the price down. You’d think that with my years of experience in sales I’d be an accomplished negotiator when it comes these types of personal purchases – but I’m really not. The reason for this is simple; before I go to purchase anything, I thoroughly research and decide exactly what I want to buy. As such, when I approach the seller I have no leverage; I’ve already decided what I want and nothing else will do. I could try to bluff, but I’m not willing to risk losing my preferred acquisition. In order to be a truly effective negotiator you must be willing to walk away from the table — for that, you must have alternatives.
It’s interesting to compare my experience in these situations with President Bush’s recent failure to secure cooperation from the Saudis regarding oil price and production. Many have criticized the president for not taking a stronger position, believing that he simply needed to “put his foot down” with the Saudi king. Nevertheless, I think this is a very simplistic appraisal of the situation. Our problems with the skyrocketing price of oil go far beyond “tough talk”. They are a reality that we face in a world where the influence of the United States has been eroded by increasing international hostility, and challenges from rising powers such as India and China. While still the world’s largest economy, our leverage has diminished – particularly in regards to a resource which is essential to our economic vitality and for which we currently have no viable alternatives.
As you may have guessed from this article, I’m not the world’s greatest poker player. In my business experience I have witnessed firsthand the disastrous consequences when leaders attempt to bluff their way into a position of strength, only to have that bluff called. This is often devastating as a leader has to choose between losing something that is essential, or face the humiliation of begging and apologizing to recover it. Our dependence on oil, and hence our compromised leverage, is clearly demonstrated by the fact that while gas prices have increased oil consumption has largely remained the same. While President Bush may be blamed for many of the circumstances that have led to rising oil prices, it is ultimately futile to criticize him for his lack of negotiating prowess in this regard. Anyone with the skill to effectively bluff the Saudis or any other major oil producer would do well to seek their fortunes in Vegas.
I’m interested in what you have to say about this article! Whether you agree or disagree, please feel free to leave a comment. If you are reading this article from the main page, you can get to the comments area by clicking on the “Comment” link seen below; otherwise, just type your comment in the box displayed below. You can also use any of the social networking links below to recommend this article to others. I look forward to hearing from you!
July 17th, 2008 at 3:00 pm
[...] right, America, it’s time to have a very serious talk about our energy problems. As much as we may want to blame the President, OPEC, “Big Oil” or any other number of nefarious entities for driving up our prices at [...]
September 12th, 2008 at 6:52 pm
Hey! was searching Google for john piano player and your blog regarding Negotiating Oil Prices looks really interesting for me. I will definitely bookmark it and come back for more cool postings to read! Cheers!
September 25th, 2008 at 9:06 pm
Thanks for this post!