On an almost weekly basis, OPEC makes its case that increasing oil production will not bring down the price of crude. And, almost every week oil consuming countries see the statements as self-serving. While the members of the cartel bring in tens of billions of dollars with oil hitting $116, there is absolutely no economic incentive for them to pump on additional drop of the black gold.
Bloomberg reports that OPEC's chief says, "Any increase in production now will not have an impact on prices because there is a balance between supply and demand." The statement is laughable on the face of it. While speculation in price and a falling dollar have contributed to some of the rise in crude, so has demand from countries like China and India. Demand has also not fallen in the U.S., Europe, and Japan, which have traditionally been the largest markets of oil.
Unfortunately, consuming nations have very little leverage with OPEC. The U.S. does offer military security to many Arab states in the Middle East, but it does not seem to be willing to use that as a bargaining chip.
Too bad.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-20-2008 @ 11:22AM
John said...
This just astonishes me. Why would a producers have any interest in depressing the price for their product through voluntary overproduction?
4-20-2008 @ 11:57AM
John said...
Actually, consuming nations have tremendous leverage. We just have a clown in the White House who is incompetent and against using it.
If the United States had gone on a conservation kick in 2005, oil would be around $50 a barrel right now.
Instead, our White House defended the SUV/low-mileage vehicles.
I can't imagine why producers would want to reduce prices. I can assure you that the owners of American oil wells do not want OPEC to produce more oil.
4-20-2008 @ 1:14PM
Rick said...
This guy is a hack for the oil companies.
Every credible report that I have seen has said that gasoline and oil consumption on a year to basis.
Second two years ago Saudia Arabia had offered to pump 1 million of barrells of oil a day more. When they approached the western oil companies about taking delivery, per the Saudi oil minister they were told thank you but NO Thank you we have no place to put the oil.
The reason gas supplies are tight in the US is because the refineries have chosen to cut their production and reduce the supply of gas.
This is an industry and oil supplying nation created hoax as they are the ones with the money to send the price sky high with their own specualation and need to invest above average historical profits. Sooner or later this bubble will crash just as the western electrical supply shortage crashed when the speculative trading companies failed