(Here’s a good way to lower oil prices. Toss yer car in the recycle bin!)
A pair of recent Reuters stories mention a deferment in oil production cuts originally planned for this month but they are torn over how we might react to these cuts. Today oil has dropped to $49 a barrel down from $147 a barrel in July.
Here is the seeb zamini (Iranian for “meat and potatoes”?) of the story from Gulfnews.com:
Caught off-guard by a severe decline in energy consumption in the West, Opec is wary of being seen to panic after two previous rounds of cuts failed to shore up prices.
Ministers arriving for today’s meeting said they were likely to defer a decision on new cuts until they meet again in Algeria, when they can better judge if all members have met previous commitments.
“It’s a consultative meeting. We will prepare some more information and make a final decision maybe in Algeria,” said Iranian Oil Minister Ghulam Hussain Nozari.
Prior to the meeting Venezuela, Iran and Iraq were calling for more aggressive restraints but by yesterday only Iraq wanted an immediate cut.
“We support a production cut … we support a reduction now,” said Iraqi Oil Minister Shiite Hussein Ibrahim Saleh al-Shahristani.
UAE Energy Minister Mohammad Bin Dha’en Al Hamili said he believed the oil market was oversupplied, but declined to give any comment on whether Opec might agree to cut production.
Powerless so far to prop up prices, delegates say Opec is worried that another quick cut could undermine its credibility among traders focused on the spread of the financial crisis into the real economy and its impact on oil demand and inventories.
Look for the planned supply cut to be announced around the end of Janurary when Opec hopes to jack prices back up to “normal”.
Maybe if we keep demand down we’ll see Opec oil drop like US Crude did in1998 when it hit a rock bottom price of $10.35 a barrel! That would be GREAT, right? But really, who wants their economy to be built on the cornerstone of all that political unrest? It really is time to divorce oil… they’re already talking about divorcing the Dollar.
Oh and where did I get the “expected to rocket back over $100 a barrel”? A recent poll on GasBuddy shows that of the 20,000+ respondents, 51% expect oil to once again run amuck in the next 6-12 months and a combined 73% believe it will happen sometime in the next 6-24 months. Well, what do they know?! If you believe in the cognition of collective intelligence, then there might be some truth to their expectations.
A gas hike seems inevitable, especially if Americans continue to consume at our traditional levels. Qatari Oil Minister Abdullah al-Attiyah seems pretty confident that we will step back into our old habits when he said
“In our industry sometimes we can be sick but will never die. We’ve seen it for the last 20 years, up and down, it’s normal in this business, it’s a cycle and we have to live with it. But we will come back as usual.” (Reuters)
If we continue our relationship with oil, we will prove him right.
(Do you want YOUR economy married to oil?)