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OPEC Faces "Demand Destruction"

OPEC meets tomorrow and the betting is that it will do little to alter the cartel's output. With prices falling, the group, which provides about 40 percent of the world's petroleum, sees little need to boost production. Yet prices are still so high that it would be politically difficult for OPEC's mightiest member, Saudi Arabia, to heed the calls of the group's price hawks to cut production much to keep prices comfortably over $100 a barrel.

There is a surreal aspect to the entire debate. Less than two years ago, OPEC cut production by 1.5 million barrels a day to keep prices from slipping below $55 a barrel. Now Venezuela and Iran want the group to keep prices from dropping below $100 a barrel. They have tasted what $145-a-barrel oil tastes like just in July, and they thought it was good.

But the fact of the matter is that it's hard to imagine that the world can afford these prices for a protracted period of time. In the first seven months of the year, OPEC countries have received more revenues than they did all of last year. As many economists in the United States have noted, this is inflating the U.S. trade deficit, undercutting the U.S. dollar and sapping the economy of money that would otherwise have eased spending burdens of households or gone into badly needed savings and investment.

Saudi Arabia is the key player at OPEC meetings. It has the most latitude to increase, or cut, production. It raised output in recent months, pumping an extra half million barrels a day or so. Many Saudi policy makers have long fretted that high prices could force consuming countries to find alternatives ranging from biofuels to electric cars. In OPEC meetings, this is called "demand destruction." Or as one-time Saudi oil minister Zaki Yamani famously said, the stone age didn't end because the world ran out of stones, a reference to the possibility that people might stop using oil even if oil were still around. More recently, the Saudi King Abdullah said he would like to see prices come down under $100 a barrel. They aren't far off now, closing Friday at $106, down almost 30 percent from the $147 high in early July.

Yet perspectives have changed in OPEC and the gap between pricing doves and hawks has narrowed. Even Saudi oil officials see burgeoning demand in places like China and India as helping set a floor to world demand, and they too have seen that the world can tolerate much higher oil prices than anyone thought sustainable just a couple of years, or a few months ago.

News reports have said that Saudi Arabia, which boosted output over the summer, is already trimming back slightly. But slight actions are probably all we'll see.

There were plenty of hints about OPEC's outlook in a report issued last month. It suggested that the organization was leaning more toward trimming output than raising it. "Risks to the outlook for the world oil market appear to be on the downside," the group said. "With current OPEC production well above the expected demand for OPEC crude, there is potential for a sharp build in crude oil inventories."

Recognizing weak demand in industrialized countries, the group's analysts said that "The demand for OPEC crude in 2008 is estimated to average 32.1 million barrels a day, a decline of 0.1 million barrels a day over the previous year. In 2009, the demand for OPEC crude is expected to average 31.3 million barrels a day or 0.7 million barrels a day lower than in 2008."

Forecasts among U.S. analysts continue to be all over the map. Some forecast year end prices around $80 or $90 a barrel. Others say oil prices will bounce back to $150 or so. For now, the ball is in the Saudi royal court.

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Comments (23)

Anonymous:

"ok jackass, lets say America has 100 years of oil to use...what alternatives is the congress working on right now to switch to an alternative energy source within these 100 years...what new science will create lubricants for industry...metals and plastics...well...what?"

I'll leave your insults aside and respond to your post point-by-point. First, proven global petroleum reserves stand at 1.3 trillion barrels. Even if the world were to maintain its current level of consumption --a ridiculous proposition, given population trends and the rise of the new great economies-- we would run out of oil in 40 years, not 100. Second, precisely because petroleum is a finite resource, we should be pressing Congress to seek alternatives NOW, not later. The society which masters the development and production of clean energy technologies will be at the forefront of the global economy, not a victim of it. Now, I don't know about you, but I would prefer that that country be the United States. Finally, petroleum is a simple compound of carbon and hydrogen. It's no mystery how to replicate it's qualities. In fact, during WWII Nazi Germany produced artificial jet fuel, specifically because it lacked access to oil. And we can produce plastics and lubricants today using nothing more than plant oils. The fact is, we've clung to petroleum so long, only because it's cheaper than these alternatives. That is, until recently.....

Diogenes:

"This is also ignorant thinking just as the political claptrap earlier. Why not make use of our resources in the interim while other technologies are invented and/or put in place?"

On second thought, I agree with Shanks1. Let big oil waste billions searching for petroleum in ANWAR and the outer continental shelf. By the time they bring their product to market (conservatively estimated at 10 years), the world will have moved on to clean, renewable energy sources, and Shell/Exxon/Mobil will be bankrupt.

A Revelation {opposite of secrets/hidden} behind Closed Doors:

B R E A K i N G -- N E W S! [Back to Back].

(1)
It hath been revealed that god Player & Rabbi Jezues Yashua & ARMAGEDDON lover , Mr. Rabbi RiCk Warren , when interviewing McCain [Before the wannabe 'Warren-Show' behind closed doors]

was illegally asked, by WARREN: "Do you Consider 'JESUS-1st' or Government 1st, and [Bollixed & Split Minded Psychotic] John , Sneaky, Mass Murdering McCain Freudiantly Slipped and responded,

"Yes, of course, Christ [judeo Ju made into a Judeo Christo] is 1st!" [Similar Said!].

Note: "i" jacob J., under Penalty of Perjury herein ATTEST that Mr. Wannabe Prez, Bootlegger & wannabees 1st Lady, & 1st Man McCain's, said JESUS (not our) is 1st & not America! [Similarly!]!

Wow! Schame! --- Schame! --- Cryin-Schame!

---AND

(2):
That IRAQi OFFiCials, just 15 minutes Ago, said that IRAQ will PLEGE, in CRUDE-OiL, as Repayment TO DEMOCRATS [America] , for Every Penny that was Invested in their War Effort! And So They Can Leave sooner! [similarly Said or thought]!


SUMMARY:

1) McCAIn of Worms & His Lipstick Jezeus lovin Floozys [Palin et al] Loyalty is to Mr., Rabbi Judeo-Jew JESUS Christ & CHURCH (Evangelicals) is 1st! Not U.S.A.!And America is 2nd!!!!!

Please see this Video on Murdere 'Pilot' wanbe Prez Poppason John boy Dropping "Napalm" & Mass Murdering & Mass Destroying Civilization!

http://www.youtube.com/watch?v=Ev2dEqrN4i0

John McCain Got Shot Down while on a Killing Spree!

Note: And Mrs. & Mr. John McCains, in Fact: also hath lots of American (not Just Vietnamese) Teenage & Young adult Blood-on-their-Jesus loving Hands via Death by ALCHOL Pushing. Wow , SCHAME! M U D E R E R!

Note: John McCain, after Being Shot Down, smoked (not "Puff", unlike Bill Clinton)) MARiJUANNA & also 'Chased The Dragon" (Opium)!!!!!!!! A Drug Addict! Not like Obama!

2) IRAQi MALLAKi Gov (People) is Generous enough, to Pay back the "AMERiCAn PEOPLE" (not the BUSH, McCain, CHANEY Oil Interests via Evangelicals & Co's) the WAR Expense of The Bush's War, but Pay Directly to DEMOCRATs via Congress [the U.S, TREASURY ] in CRUDE Oil, so Americans will leave before 2011!

---
Imagine: The MALLACKi Government Of Iraq , will Reinburse America in Full, via Oil Barter!

Example: If The War Cost 1/ Trillion Dollars: Then Devide (by Highest Known Oil Price Per Barrel or per 55 Gallons) andf thus ye get the Amount Of Oil that Our "Reserve of National Oil' can live off of!???

skeptonomist:

Most OPEC countries are producing full-bore and want Saudi Arabia to cut back, or at least not increase production, to keep the price high. This game has been going on since the 70's, and the Saudis are probably not influenced too much by "political pressure" from other OPEC members. The Bush administration thought they could apply pressure - or supplication - not for nothing is Bush on a hand-holding basis with Saudi sheiks - but this has had very limited success. The ball is indeed in the Saudi's court (insofar as anyone has control), a fact which seems little recognized in the US media and politics, which tend to go on endlessly about the US oil companies, speculators and drilling in protected areas.

"The discovery of the cobalt/phosphate catalyzer, that will split water into hydrogen and oxygen, just may be the answer." Sorry, catalysis can't change the energy which must go into dissociating water into hydrogen and oxygen, and this is in practice greater than the energy which is gained when they are recombined (catalysis only reduces this excess). Hydrogen is not itself an energy source - fuel cells offer only a potentially more efficient means of using current energy sources, and realization of that potential is far from certain at the moment.

Shanks1:

Diogenes:
So long as America's energy policy remains "drill, baby, drill!", OPEC has nothing to fear.

------------------

This is also ignorant thinking just as the political claptrap earlier. Why not make use of our resources in the interim while other technologies are invented and/or put in place?

Devoid:

Keep watching the the oil as the robber barons steal everything else.

Diogenes:

So long as America's energy policy remains "drill, baby, drill!", OPEC has nothing to fear.

When PALiN & McCain et al say, "god", they , Split-mindedly Mean Mr. Rabbi JESUS:

--
When PALiN & McCain et al say, "god", they , Split-mindedly Mean Mr. Rabbi JESUS.

-
VOTE: Apocalyptic Government (BiDEN & OBAMA), not Pre-Apocalyptic Theocracy (PALiN & MCcAiN)! IMPORTANT: We do Not Need religio “Split Minded Thinkers/believers” in Secular Government! This is acute “Religious JEALOUSY Psychosis” & or “Double-Standard Psychosis” hinged on “Pre-Apocalyptic Syndrome”. It is Fatal for Any Leadership of Our U.S. HELM! Aka The Great Hol{i- Cosmic, Nebula Built (not Bible) REPUBLiC & Continent of AMERiCA, aka U.S. of A.!
-
Amazing () No Grace!

Note: It takes a Mind G-r-e-a-t-e-r than the gods (not OUR) of the EViLGELiCAL, aka SATANs!
--

When Mrs. PALiN Blurts-out "God" (not O.U.R. G-D) she is 'Split Mindedly' sayig My Judeo-Ju god is my Mr. Judeo-Ju JESUS!

To Them Rabbi Judeo-Jew JESUS, turned into a Judeo-Christ, via their Ancestral as NiCOLAiTAN(s), is Their god (not our G-D)!

Remember: Palin WANTS TO Introduce, in ALL PUBLiC SCHOOLS, the Evangelicals Jesus/god , as their Creator (not OUR) "iNTELLIGENT DESiGN" quasi Science courses!


JESUS is their god, not O.U.R.-G-D [an "IT" niether a HE/HiM nor a She/Her]! god is their (Evilgelicals) Mr. Rabbi god Player JESUS, the Judeo-Ju turned into their Judeo-Christ!

Note: They , these Bollixed girls & boys, Will also, sneakly, Make 'CHRiSTiANiTY" the Official Religious Belief in America.

Prophecy: They [Mike Huckabees, Rick Warrens, John Haggees, RiChard Lands etc..] will stir-up 'Riots" or cause a Civil War or incite a National-Tention, like no other in American History, here!

Hence Why They Love "GUNS" [NRA] & "JESUS" & them , ArM-AG-GEDDON lovers, EViL-GELiCALS (includes MORMONS]!

Talking about Anti-Christ, Anti-JU, Anti-Islam, Hindu, Buddhist, Anti SECULAR., EC{LAT-ARiANs..!

--- Hello {WORLD} If Ye Want to see LEGiSLATiNG From Their Pulpit & Not Legislate from the SECULAR Bench, then Vote Palin & MacCain, hence NO MORE U.S. CONSTiTUTiON, as We once Knew it!
---
Sumitted by the GRiDARiAN-DEMOCRACY & TRANS{FiNiTE CiViLiZATiON Movement via the EC{LAT-ARiAN Party U.S.A., 2013+. YA!

Bert:

This little global economic wrestling match is getting stupid, and, what's worse, it's had a negative impact both on private citizens and small businesses that don't get the fat discounts on bulk fuel orders etc. The answer? It's under the hood, and behind the engine, the transmission.
The older cars with carburetors were in some cases actually MORE efficient than some of the newer models in terms of fuel usage. The japanese models, the corolla, the camry, the civic, and even the little egg-mobile, the Geo metro, these were all fairly efficient cars, even in the early 90's, getting 30, even 40MPG. Ah, but the mainstay cars, the 70's land yachts, were still to be seen cruising america's roads, a testament to great Detroit engineering, bearings that didn't wear out because they were overdesigned. Can't have THAT, stifles the industry if things last too long. So, the efficient disposable car came into being, creating jobs and for the most part, less pollution(depending on the condition of the piston rings, there). Emissions became stricter and stricter, and now we have an automotive world where most people driving the cars are not qualified to pull the hood release.
3,4,5 computers, thousands of dollars worth of computer parts and exotic metals, and a sticker price in the tens of thousands. Long gone are the days of dollar gas and 5 thousand dollar new car prices, replaced with low monthly payments (for LIFE) and expensive fuel. Someone's making a mint off the whole deal, and by all accounts, the people making the money off of all of this reside primarily in the middle east.

So, how can you kind of change the status quo, there? Well, there's two ways, one, take care of your 'ride', and two, keep your foot off the gas, and preferably, the key out of the ignition completely. Other ways forward include downsizing the engine, and exploring the wonderful world of biofuels. In terms of governance and economics,
study the commodities market and the stock market, and try and glean out for yourself what kind of high-dollar clown circus they've got running in there, and what a national liability that has all become, as well as the motives and motivations of various 'playas' who are having a high time of it while other people are missing meals and car payments etc. As usual, the modern world is a rich man's game, and everyone else is just along for the ride. But, various pressures have combined to make it thus, and there is some legitimacy to environmental concerns, California's been choking on their auto exhaust for decades, less so in recent years due to strict emissions, but the sheer number of cars has brought back the 'brown L.A. haze' to some degree. Then, there was the stink about MTBE, that magical oxygenating ingredient and infamous groundwater contaminant, and the more sinister possibility that the refineries were simply disposing of their unwanted waste by mixing it in with the fuel, for disposal in the millions of 4, 6, and 8 cylinder 'furnaces' across the country.
Anyway you look at it, the fuels business has a lot of controversy and politics attached to it,
and it's just put this country in a really ugly situation.

How to fix it? Well, there's a couple ways that I described above, but there's more, still, and some independent reading is indicated here. A century ago, mass production put keys in people's hands, in this one, the 'masses' themselves are going to have to go into production themselves and develop some of these energy concepts into workable solutions for the market. Folks abroad may be sitting on safes full of our money, but they still don't own the United States or its' citizens, much as they might like to, and if you think about it, we made em rich, so, in a way, they kind of owe us. But, in the likely event that they don't feel like donating anything back, well, that's fine, too, there's more than one way to move a pallet of freight and given a decade or so, that pallet won't require any diesel fuel for its' movement, and hence no more imports. They talk about peak oil, well I say it's OPEC's peak, from here on in scientists and researchers and industry specialists and even shade-tree mechanics across the country are going to be 'working the problem', and the folks beyond our borders can shake their fists all they want, and likely they'll get REALLY mad the day that GM and others start turning out the new 'green' cars in higher volume, because the oil under their feet, and hence their license to politicize, will become essentially void of meaning and value. What'll get really exciting is when they start offering 'retro' kits to take your older car, and drop the old engine/trans out of it in favor of new componirmits. Lysdexic gearheads, untie! LOL

Free-Media-My-ADollar-Dollar:

Washington post should talk about both OPEC and AIPAC.

John:

"it's the dems, reid and pelosi that want to ween Americans off gasoline, not opec...the high price is because of reid and pelosi not wanting Americans to use gasoline..." DWIGHT

When I read comments like this one it seems hopeless to expect support for solutions from voters who actively look for ignorant lies to believe, and like to maintain a sense of history that only includes the last 24 months. Maybe it's all the junk food.

Chris:

How naive must one be to believe that it is OPEC that must do something to keep us on oil. We are doing a fine job of that ourselves. We chant "Drill! Drill! Drill!" rather than "Invent! Reduce! Create!" Americans will stay on oil for the foreseeable future regardless of costs.

Salamon:

I do not see any reason why OPEC should allow lower prices for a limited resource, where the maximum production has stayed static for the most part in the last couple of years. There is no immediate replacement, and even new energy production via wind etc, will require large and lengthy investment for infrastructure [high voltage lines] for the USA. During this time herbacides pestecides, plastic for clothing or cars, etc all need oil/gas for base material.

Thinking of USA based monopolies, such as Microsoft, Oracle, entertainemnt businesses [all beneficiary of patent/copyright laws] do not seem to ever lower prices, but keep them high to maximize profit. Whats good for the gander is also beneficient for the goose.

Perhaps if the USA would cut back on defence spending [24 gal per day per soldier/mercanary ion Iraq Afganistan/etc] the demand for oil would be greatly decreased. Cutting down production of Guns and ammunition to level of OECD [excluding USA/Israel] would also save tremendous amounts of nonrenewable resource.

While the recent decrease in US$ price of oil is partially due to presumed reduction of demand, it is also due to machinations by central banks to raise the value of the $ [intervention was in excess of 30 billin dollars by the Europe3an central bank]. Cutting by 2-3 million barrels a day in use is a very small %, especailly as the Saudies are increasing the internal use of OIL, for such things as Aluminium refinery [very energy dependent] and other major infrastructure projects. Same applies to almost all Opec members [and also to Russia] they are all trying to get away from pure energy exporters, thus their internal use will increase and balance USA demand drop.

Rick Jones, Fredericksburg, VA:

"Can OPEC keep prices high without forcing us to seek alternatives?"

Nope, but so what. We will seek alternatives anyway, so they may as well keep the price high. The demand will remain high long after the well goes dry. There is no way we can convert to alternatives that quickly.

Dwight:

it's the dems, reid and pelosi that want to ween Americans off gasoline, not opec...the high price is because of reid and pelosi not wanting Americans to use gasoline...

JoeC:

I think we should charge the same for a bushel of wheat, as for a barrel of oil. Not the 12 dollars it costs now. The people in the middle east have to eat too.

Onaeb:

Now, for the first time in history, because of the work done by the geniuses at MIT, Drs. Norgenson and Duhigg, we may have THE answer. These man have discovered the holy grail of energy creation with their work in calalysis. The discovery of the cobalt/phosphate catalyzer, that will split water into hydrogen and oxygen, just may be the answer. If water is split in the vehicle, then the hydrogen could be run through an energy cell to produce electricity to run the car. Watch for more news releases on this topic in the future. To verify check MIT's news releases. We may be approaching a truely significant event. IMO

Mariano Patalinjug:

Yonkers, New York
08 September 2008

OPEC and the other oil-producing countries will be doing oil-consuming countries a huge favor by keeping production continually below demand so that the price of oil will not go below $100 a barrel and continue to retail at $4 and above a barrel at pumps in the United States and elsewhere.

Already, the oil-consuming countries are getting really serious about (1) cutting demand in every possible way, and drastically; and 2) pushing for all of the alternative sources of energy, such as wind, solar, wave, natural gas, geothermal, biofuels, compressed air, hydrogen, and even bacteria.

A much-beneficial result from a drastic and eventually a complete shift from fossil fuel to alternative sources of energy is that carbon emissions will be reduced dramatically and global warming likewise mitigated drastically.

The oil-producing countries had better get used to the idea that sooner, rather than later, fossil fuel as the main source of global energy will be a thing of the past. Get used to the idea, yes, and start preparing even now for that day when fossil fuel will simply be a negligible source of global energy.

Mariano Patalinjug
MarPatalinjug@aol.com

PSolus:

"We need an war on oil NOW.'

Yes, and that war will be every bit as successful as the wars on poverty, drugs, and the current war on terrorism.

Rich Rosenthal:

"Destruction of demand" is just not an economic possibility, it is an environmental necessity. We need an war on oil NOW.

Harold Chorney in Montréal:

Cartels will by their nature seek to extract the maximum revenue from those that demand their product. The best solution to protect consumers from exploitation and simultaneously protect the environment is to reduce dependence by technological innovation. Greater investment in public transportation, greater use of hybrid vehicles, solar power, wind power and other comparable innovative modes of transportation are needed.This should be happening throughout the industrialized world . But here in North America we have ample supplies for the next fifty years of more conventional fuels but what we lack is a consensus among the three players Canada, the US and Mexico as to how to bring these supplies to the market place at fair prices in an environmentally sound way. This along with improving the operation of NAFTA to protect workers in all three countries from hardship and ensuring fair market access for each country should be a major topic of discssion in the coming year.

YourCommonSense:

If we can finally commit to drastically cutting oil use by incentivising alternative energy R/D and cutting or lessening the tax credits given to these over-scaled energy companies we can affectively take the long-term leverage away from Opec, U.S. Oil companies could scale down their massive enities and remain competitive on the global market. Sen Obama and both house and senate democrats have expressed thier openess to allow some coastal drilling in tandem with incentives for fast-tracking alternative energy R/D and other energy conserving measures. The solution involves making the investment in our semi-national transition to alternatives, as well as developing carbon sequestration techniques for clean coal, nuclear waste storage capacities, natural gas delivery, and in the case of market competetiveness, coastal drilling options for domestic producers. The competitiveness of these companies is immensely important, however domestic energy security should not be pegged to the competitive advantages or lack thereof in terms of domestic producers. These new technologies will be the exported products of tomorrow and potentially could partially re-invigorate domestic manufacturing, the transition to alternative energy would also require skilled trade and service workers in the field of green energy, photo-voltaic installation, repair and maintainence, etc. This could be the new American era responsible industrialization, America should be the global leader, not playing global catch-up, what we need is a visionary who can inspire Americans to believe this change is possible while keeping policies focused on achieving the desired end game of energy independance.

Oy!:

Just another reason to raise the gas/carbon tax and put the proceeds to good use funding the alternatives, mass transit, and infrastructure, rather than funding OPEC, et al.

When the oil is gone, there ain't no more being made...

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