| Submit your comments on this article |
| Fifth Column |
| Opec concerned over falling oil prices |
| 2006-09-10 |
| Ministers of the Organisation of the Petroleum Exporting Countries arriving in Vienna on Sunday have indicated concern that oil prices may fall. Though the eleven-nation group is unlikely to officially reduce its production quota when it meets on Monday, the change in ministers’ tone could be a harbinger of things to come. “Inventories are very comfortable, prices are coming down and nobody is concerned about a shortage of supply,” Ali Naimi, Saudi Arabia’s oil minister and Opec’s most powerful member, said as he arrived in Vienna. ADVERTISEMENT At previous meetings Opec members, including Saudi Arabia, have voiced discomfort about oil prices being too high, threatening global economic growth. But there was little the group could do because its members were largely already producing at full capacity while high prices were prompted mainly by worries about sudden interruptions in supply caused by hurricanes or geopolitical tensions. Now ministers no longer think oil prices, at around $67 a barrel, are too high. Instead they are concerned that the recent $10 drop in prices could be a sign that the market is at the beginning of a larger correction, one that could eventually impinge on oil producers’ revenues. In the US, for example, sport utility vehicle sales fell 14 per cent in August, while sales of compact cars were up 18 per cent. Opec expects oil consumption in North America to increase by only 90,000 b/d in 2006, compared to the 230,000 b/d jump it experienced in 2005 and 520,000 b/d in 2004. This would see Opec increasingly dependent on strong economic growth in China and other developing countries feeding demand for oil. But this brings back bad memories of 1997, when Asia’s financial crisis took Opec by surprise and the drop in demand from the region eventually pushed prices down to $10 a barrel. China, which in 2004 saw demand jump by 790,000 b/d, with other Asian countries adding another 430,000 b/d, is expected to register growth of 540,000 b/d this year. No analyst is talking about a retreat to $10 per barrel, but even a slide to a more realistic $50 would displease many Opec ministers. To guard itself against a sudden oversupply in the market Opec is already producing 500,000 b/d below its quota of 28m b/d. At the group’s meeting the ministers are likely to raise the possibility that they will have to take action at their next meeting in December. With oil prices still in the mid-$60 range, output cuts risk painting the group as a greedy cartel and enemy of the west. Until their next meeting, ministers still have two months of hurricane spotting to do and three months to keep tabs on the unfolding diplomatic drama between the west and Iran. By then they should also have a better grasp of how cold the northern hemisphere’s winter will be and how much heating oil the US and Europe will need. |
| Posted by:3dc |
| #17 tap. tap. tap. Nope. Sympathy meter still reading zero. |
| Posted by: anymouse 2006-09-10 23:22 |
| #16 ed - that would require politicians to think beyond the next election and corporations to think beyond the next quarter. Never going to happen - damn it. |
| Posted by: DMFD 2006-09-10 22:56 |
| #15 Trade policy can go to hell. Doha failed anyway. |
| Posted by: 3dc 2006-09-10 22:54 |
| #14 that won't change without a drastic change in US trade policy. $4000 price differential |
| Posted by: ed 2006-09-10 22:11 |
| #13 Oil prices are not driven by US demand when Asian demand is increasing by over 1 million barrels/year. With Chinese vehicle production increasing 25% each year, that won't without a drastic change in US trade policy. The smartest thing the US could do is build a enough 100,000 barrel/day $4B coal2oil plants to replace imports. That sets a US ceiling on prices at $35-40/barrel, less if nuclear plants are colocated to provide heat and hydrogen inputs. Then if oil prices drop under $30/barrel it is cheaper to idle the plants with subsidies (capital cost of $4-5/barrel over the 30-40 year life of the plant) than do what we are currently doing. Another thing the Us could do is go wholesale hybrid or plug in hybrid with subsidies wiping out the $3000 price differential (Ford Escape). At $60B/year for 15M cars, it is still much cheaper than trying to bring democracy to murderous primitives. |
| Posted by: ed 2006-09-10 22:06 |
| #12 No it's more like the Chinese couldn't afford to subsidize $3 a gallon gas for long? |
| Posted by: Sock Puppet of Doom 2006-09-10 22:03 |
| #11 Guess the Chinese couldn't afford $3 a gallon gas for long? |
| Posted by: Hupereck Ebbish7621 2006-09-10 20:50 |
| #10 In other news, cheaper oil is good for Republicans this November. |
| Posted by: Iblis 2006-09-10 19:25 |
| #9 High oil costs (and the associated high state and federal taxes) much like illegal immigrants, and import tariffs are huge revenue producers for the donks in Washington. It's a business decision, nothing will change. |
| Posted by: Besoeker 2006-09-10 17:55 |
| #8 Just an observation. Higher oil taxes blunt the conservation causing effect of supply and demand. |
| Posted by: Bright Pebbles in Blairistan 2006-09-10 17:50 |
| #7 The Multinational Oil Companies will not be helping us out here, they want to keep us hooked. Indeed they do. If you doubt it, just have a look at our decrepid railroad system. Oh, you'd rather fly than go by car or rail? You can return that $700. Brooks Bros. suit if it's not entirely to your liking. Try to do the same with an airline ticket. Last loaf of break or case of beer on the shelf still costs about he safe as the first case... not so with an ailine seat. Ever notice how closely alligned the fares of all the carriers are? We used to refer to that as "price fixing." A term no longer heard. The streetcar will never return, they've seen to that. Yes, it's all about OIL. |
| Posted by: Besoeker 2006-09-10 17:45 |
| #6 While this is a good thing short term, we really, really need to get past being hooked on OPECs oil and move on to something else to fuel our tranportation and electric needs besides oil and imported natural gas. We should be self-sufficent in Energy and Food and hostage to no ones agenda, economics, or politics. High Oil prices spur research that can amd must lead to energy indpendence. The Multinational Oil Companies will not be helping us out here, they want to keep us hooked. We need to proceed in spite of them and the Enviromental TRANZIs. Prices need to stay above 50 bucks. |
| Posted by: Sock Puppet of Doom 2006-09-10 17:38 |
| #5 "Opec concerned over falling oil prices" I have just got to find my nano-violin! I'm missing so many opportunities to give a nano-concert. :-D |
| Posted by: Barbara Skolaut 2006-09-10 17:08 |
| #4 only 90,000 b/d in 2006, Striking back, the American public has had enough. Now if we can turn their greed into infighting and break OPEC. |
| Posted by: 49 Pan 2006-09-10 17:05 |
| #3 oil at $55-60 would be a welcome boost to the economy however, if prices collapse to the low 40s it would be devestating to a number of the alternate sources; for example the deep resource that Chevron discovered recently requires a price of $50 or so to be economically developed |
| Posted by: mhw 2006-09-10 16:48 |
| #2 "market forces" - the West's secret weapon. If we use it right. It's starting - continue the push ahead of winter. Panic them. |
| Posted by: Thinemp Whimble2412 2006-09-10 14:26 |
| #1 Welcome to Capitalist Economics 101. Americans are conserving, something we do very very well when the high cost of something hits our wallets. Less use of a commodity = larger supply = lower prices. IIRC, the last time prices crunched, OPEC went into 'every-man-for-himself' mode and kept producing at full blast simply to keep the money coming in at all. And since people have gotten a pretty decent education this time on how market forces work, I suspect they will continue to conserve. Mike |
| Posted by: Mike Kozlowski 2006-09-10 13:43 |