OPEC

[mhailey]

So, OPEC anounces its largest ever oil production cut of 2,200,000 barrels per day, the price of oil drops 7%. HOW AWSOME IS THAT!

Is OPEC outdated and impotent?

Matt

Edit:

Here is a great article on it.

http://www.businessweek.com/magazine...ge_top+stories

[nun2sharp]

As long as we can show them that we can control our appetite for oil!

[Earthdawn]

I saw that as well....

obvious who is controlling OPEC ... I bet before summer you will see another cut unless the price per barrel goes up

[Bruno]

I'd like to think it could be so, but I wouldn't count on it. First we need hydrogen or electric cars.
OPEC is like De Beers: they are the 600 pound gorrilla that you have to deal with in their business.
And what they do stinks badly, but there is nothing the common man can do about it. They have us by the short and curlies.

This price drop is interesting, but ultimately, OPEC sets the production levels. Either this price drop will not last, or they will cut back on production levels even further. Apart from going to alternatives for fuel, we are at their mercy.

[mhailey]

I'd like to think it could be so, but I wouldn't count on it. First we need hydrogen or electric cars.
OPEC is like De Beers: they are the 600 pound gorrilla that you have to deal with in their business.
And what they do stinks badly, but there is nothing the common man can do about it. They have us by the short and curlies.

This price drop is interesting, but ultimately, OPEC sets the production levels. Either this price drop will not last, or they will cut back on production levels even further. Apart from going to alternatives for fuel, we are at their mercy.

I agree whole heartedly. We need alternatives, and electricity, generated by nulear plants, is going to be key IMHO. However, I don't think that OPEC is controling the market, and they are riding the wave down, just like we were force to ride it up.


The part of the article I found really interesting was in the last paragraph:

"Worldwide, an estimated 21 ships are holding about 40 million barrels. At the end of October there were just five. That means producers have been churning out 750,000 to 1 million barrels a day for which there are no ready buyers. With the production cuts, OPEC is simply trying to avoid swamping the world with oil."

[gugi]

I think that's a rather premature obituary. OPEC provides most of the world's oil and they are anything but irrelevant. Of course their problem is that most of the countries need a minimum amount of money influx, just like the rest of the world needs a minimum amount of oil influx. So that's a pretty strong positive feedback in the system. If the OPEC countries are smart they would stash some money when the prices are high, so that they get more leverage and counterbalance this positive feedback. The same way as the oil importers would be smart to stash some oil reserves when the prices are low...

Back to domestic politics, the governor of Alaska may have more difficulty finishing her term, than starting it. At $40/barrel all of a sudden the shift of the tax burden from citizens towards the oil companies, or that pipeline may not look all that smart anymore. I doubt there will be another tax rebate for Alaskans next year.

The point I'm trying to make is that this is a complex problem and I don't buy any of these one-sided analyses that are only based on whatever current situation is. Just like when oil was $150/barrel energy independence was the ticket to win any election...

But in any case BusinessWeek is not the Economist...

[droche]

A lot of OPEC countries cheat on the quotas anyway so production limits set by them do not have the effect on the world market as it would seem on the surface.