Oh the pain
The WSJ has a piece on the woes of being OPEC. It is called “Worries of Slowing Oil Demand Make OPEC Wary of Raising Output.” We should all have such problems:
Despite Friday’s surge in oil to a new peak above $139 a barrel, Organization of Petroleum Exporting Countries officials have latched onto recent reports that point to a further fall in crude-oil demand, as sharply higher energy and commodity prices and cooling housing markets take their toll on consumers globally…
“Where is the demand going? It keeps going down. People need to look at that. Why would we produce more?” Shokri Ghanem, Libya’s top oil official, said in an interview. He said he believes the world market has enough oil. A Gulf OPEC official echoed that, saying the 13-nation group “will provide what the market wants. If customers aren’t asking for it, we’re not going to supply it. We don’t think more oil will lower prices anyway.”…
The International Energy Agency, whose reports are taken as the main authority on energy market conditions, has already chopped its 2008 world oil-demand growth forecast by 54% to one million barrels a day…recent revisions by the outlook for world economic growth could prompt the IEA to reduce its forecasts further. Last week, the Organization for Economic Cooperation and Development said growth in its 30 member nations, which account for the bulk of the world’s economic activity, will slow to 1.8% this year and 1.7% in 2009 versus earlier forecasts of 2.3% and 2.4%.
“If customers aren’t asking for it, we’re not going to supply it. We don’t think more oil will lower prices anyway.” Hmmm. While it is true that the supply of oil appears adequate, it’s more than a bit self serving to suggest that greater supply would not result in lower prices. How nuts is it to give such pricing power in the futures market to a cartel in an industry in which insider trading is perfectly legal and common? (As nuts as not even bothering to drill for our own oil?)
June 9th, 2008 at 8:59 pm
How nuts is it to give such pricing power in the futures market to a cartel in an industry in which insider trading is perfectly legal and common?
As nuts as suing OPEC?
(As nuts as not even bothering to drill for our own oil?)
It’s worse than not bothering. The government is outright refusing to drill when industry is eager to proceed: e.g. offshore, ANWR, Colorado shale.
The government is also blocking expansion of an Illinois refinery.
(But if supplies of crude are adequate and refining is the primary bottleneck, you’d expect the price of crude to remain restrained while the price of petroleum products soared. On the contrary, percentage increases in gas prices are less than increases in crude prices.)