An OPEC official said Friday the cartel may meet to boost output ahead of its September 2008 meeting if crude oil prices keep rising, Reuters reported Friday. "If the price keeps going up, OPEC may consult on an increase in production before it meets in September," the OPEC source told Reuters Friday, speaking on condition that he not be identified. He added that the increase "would have to be more than 500,000 barrels per day" to have an impact.
Oil Friday hit another record high, increasing $2.20 to $126.20 per barrel Friday morning, before easing back to $125.25, on concern about production in Nigeria amid civil unrest, and on emerging market oil demand growth, particularly in China and India. Further, institutional investor demand for oil as an asset class is also contributing to oil's record rise, many analysts agree.
'Two years, $75 late'
Economist Glen Langan told BloggingStocks Friday talk of a potential OPEC action on production is two years too late. "OPEC is two years, $75 late, I'm sorry to say," Langan said. "OPEC knew for two years that higher production was needed to help meet unprecedented emerging market demand, but they failed to act in the interests of the global economy."
Instead, Langan said, "OPEC used every excuse in the book, a falling dollar, investor speculation, Middle East tensions, to point blame for the price increase somewhere else," Langan said. "Those factors have played a role, but the biggest thing it did was serve as a pretense for OPEC's desire to push oil to a very high price. The problem is that high price will deepen the U.S. recession and will slow global growth dramatically. OPEC has been very shortsighted, to everyone's economic detriment."
Langan added that there is now a 30% chance global GDP growth will slow to less than 2% in 2008, which would be tantamount to a global recession, he said.
Based on research and growth models he's reviewed, an oil price above $100 per barrel will lead to a minimum one-year recession in the United States and also slow global growth to about 2.2% in 2008. Other economists/analysts differ, arguing that both the U.S. and global economies can maintain sufficient growth rates even with oil above $100, due to increased efficiency, among other factors.
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