The current head of OPEC, Algerian Energy Minister Chakib Khelil, seems to say the same thing once a month. The repetition does not make it more convincing, but he went back to it again this weekend.
According to the AP, his view of oil is that "the high prices do not reflect market conditions but rather other factors linked to the weakening dollar, market speculation, and the U.S. subprime mortgage market turmoil."
Recent studies indicate that there is much more at play than the dollar and traders trying to make a buck. Oil exports are falling in many countries. Last month, Indonesia said it would drop out of OPEC. It is not longer a net exporter of crude. Mexico says that some of its largest fields are aging and that their yields are down, perhaps permanently.
Even in Saudi Arabia the need for petroleum to build infrastructure and fuel cars is rising, keeping more oil inside the country.
As far as anyone can tell China, India, and the emerging markets draw as much crude now as they did when oil was below $70. Governments in many of those states are still willing to underwrite the cost of oil to help drive GDP with cheap gas and diesel.
Saying that supply and demand are not at work is a convenient way to mask greed, but it does not work.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-01-2008 @ 8:56PM
Kent said...
This scenario is a good subject for another Tom Clancy book, although he alluded to it in his recent one, "EndWar", which was o.k. where countries were battling for the control of oil. We consume too much oil at around 34 billion barrels worldwide each year worth about 3 trillion bucks. That's a lot of cash to be floating around in the hands of a few oil producing countries. I hope we respond better this time to the 2nd Oil Shock than we did during the first one back in the early 70's. No laughing matter guys.
6-02-2008 @ 7:03AM
al coholic said...
Rumor has it that a huge amount of oil is tied up in tankers hanging around ports, waiting for the current prices to reflect the futures.
I guess if the product I bought at $50 might soon be worth $130 I might gamble a little extra freight charge for the prospect of huge financial rewards.
6-03-2008 @ 2:53PM
Bobby said...
It's become tiresome to listen to the reasoning for fluctuating oil pricing. One day I read Nigeria's pipelines are in danger, the next demand has risen by .001%. That is excuse making at it's best.
If supply & demand is the true culprit when global economies start to break down under the enormous pressure of pricing supply will seek it's level.
With that said, I'm not of the opinion true economic factors normally governing pricing will make any difference. There is an incredible monetary & political agenda driving OPEC & refining capacities worldwide. The problem will have to reach critical mass being starvation & civil unrest bringing borders to the talk of possible war.
When the entire world realizes all wealth is headed to the sandy dunes & gov't's begin to crumble under the weight of their own subsidies then will this issue be resolved...