Energy Wire

« Previous Post | Next Post »

OPEC's September Surprise

Last night, the Organization of the Petroleum Exporting Countries reaffirmed its self-imposed production quotas. And it said that this time it really, really, really means it.

It took nearly six hours for OPEC ministers to come to that conclusion last night in Vienna, and one can only imagine that not every country agreed readily. Sticking to the quotas would mean a trim of about half a million barrels a day of production by Saudi Arabia, which back in June unilaterally decided to pump more than its quota. Not surprisingly, reporters in Vienna said that Saudi oil minister Ali al-Naimi made a silent exit from the meeting.

A lot of people thought that OPEC would keep production the same. After all, prices have dropped sharply since the July 11 peak, but they're still very high. The Saudi King Abdullah had said recently in an Italian publication that $100 a barrel oil was too high. On his arrival yesterday in Vienna, according to press reports, Naimi had said the oil market was "fairly well balanced" and "in a healthy position."

But other countries, already accustomed to super-high prices, want more. Even Libya, which earlier in the week hosted Secretary of State Condoleezza Rice in Tripoli on the first such visit by the top U.S. diplomat since the early 1950s, turned around in Vienna and urged production curbs to prop up prices. How's that for better relations!

Whether Saudi Arabia follows through with cuts remains to be seen.

Lehman Brothers had this to say in a new report on the meeting:

"A Saudi official said that they are not planning on reducing their output to official targets, saying that they will supply their customers with oil as demanded. We have always understood this to be the Saudis' position, and their own comment to the press was likely to counter much of the earlier press reporting that painted the decision as an unequivocal verdict and a bullish signal to markets. Saudi Arabia has the capacity, and the willingness to balance markets with incremental crude, and does not see a change in this role because of the OPEC decision."

Saudi Arabia has often gone its own way within OPEC. On the other hand, if demand for oil is weak enough, trimming output might suit the kingdom just fine. What the price will be for consuming countries remains to be seen. At the moment, it's still pretty dear.

Email the Author | Email This Post | Del.icio.us | Digg | Facebook

Comments (17)

Grant MacDonald:

I EARNED THE GETTY OIL COMPANY SHAREHOLDERS A BILLION BUCKS …
ON THE RESERVE ACQUISITION; THE WAY THEY TREAT ME … IT REALLY SUCKS!
AS THE GETTY INHERITORS BASK IN GLEE;
ALL I ASKED FOR WAS THAT THEY LOOK AFTER ME!
A BILLION DOLLARS THEY EARNED ON RESERVE …
MY FEE … I SURELY DESERVE!
IT TURNS OUT JP GETTY MAY HAVE BEEN A NAZI;
HIS FAMILY EVEN GOES BACK TO GERMANY ….
WITH HITLER, GÖRING & GOEBBELS HE DID STAND;
WHILE TRYING TO UNDERMINE THE AMERICAN LAND!
FOR PAINTINGS & ARTIFACTS HE DID RECEIVE;
WITH HIS OIL HE WAS ABLE TO DECEIVE?
HOOVER & THE FBI & ROOSEVELT THEY KNEW …
THAT JP GETTY & ESPIONAGE HE DREW?
MANY A YOUNG LAD & JEW DID DIE,
AS PLANES DROPPED BOMBS FROM THE SKY.
FOR YEARS WHILE GETTY SAT IN BERLIN,
HE MAY HAVE COMMITTED MANY A SIN?
THE ASHES AND SMOKE FROM THE CHIMNEYS IT ROSE …
WHILE OLD MAN GETTY SAT COZY … HE CHOSE!
WITH ARTWORK HELD TIGHTLY UNDER HIS ARM,
STILL DRIPPING IN BLOOD … AS THE REAL OWNER MET HARM!
INTO THE OVENS & ON MEAT HOOKS, BULLETS BETWEEN THE EYES …
LISTEN VERY CAREFULLY YOU CAN STILL HEAR THEIR CRIES!
WHILE GETTY JR. KBE,
SITS IN ENGLAND; AT HIS ESTATE AT WORMSLEY.
AND GORDO SINGS IN SAN FRANCISCO,
WITH HIS 727 IN TOW.
THE GETTY MUSEUM SITS ATOP MALIBU;
WHILE THE CORPSES OF WW II SCREAM ... “JP GETTY … WE KNOW YOU!”

http://www.iheartmusic.com/cc-common/artist_submission/player_punisher.html?art=167061&gateway=exiting

Hank whatever:

Friends, Romans and Countrymen, lend me your tractor. Hopefully you can lend me your natural gas fired tractor. And hopefully your tractor is/was manufactured in the United States of America. And maybe just maybe, in the year 2050, we can watch our grandchildren farm with their own non fossil fueled tractor. In the meanwhile, what's for dinner ? (So be it and God Willing, yadda, yadda, yadda).

Senjata:

Relax, people. Most OPEC countries can't even make their quotas. These are the ones who are asking for quota cuts. They ALWAYS think OPEC should cut the quotas. In their heart of hearts (if they have them), they believe OPEC should cut quotas to the level these countries are currently producing with a commensurate cut for countries that can actually manage their oil industry.

The other countries, of course, know this. And they're not about to let Venezuela, Iran, et al. get fat because Saudi Arabia can manage its industry and they can't. The "cuts" are going to reflect current production on one hand and simply cheating by Saudi Arabia on the other. While this is not a non-issue, it's close.

Oy!:

Raise the gas/carbon tax!
Keep the price high, but let at least some of the funding going to fund alternatives, mass transit, etc, here, rather than to them, there.

Without the higher prices, we will not make as much progress.

MFK6:

Well, what will the oil producing countries do when their oil is gone? Or when the climate change makes their food growing capabilities nil?
What will they do when the US no longer wants their oil? Hmm. Maybe a better question is what will America do then.

Yuri Lipitzmeov:

Rail all you want at OPEC, but the best revenge is to curb demand. So all you dummies need to get rid of your trucks and SUVs and start driving smart.

chickc:

OPEC are greedy jerks! I have just the place for them where people WANT to be taken advantage of. http://www.greedypeople.com

Tariq:

Your jealousy is so childish, oh grow up...!

Its their oil and its up to them to demand whatever they want, after all you should not preach free markets if you dont believe it.

No one is forcing Americans to buy their oil, so I dont understand all this anger?

In fact I am surprised the Saudis agre that oil prices are higher, would you americans have done the same for Muslims had the roles been reversed?

I bet you all would be hollering to not give them sand n#$ers a drop 'of mah oil'.....

They are still nice despite the massacres committed by the US in Iraq, I think the Arabs have no shame...because I would have cut off your oil.

Drill Now, Drill Forever:


My question is, how much money do the elites in the different OPEC countries have invested overseas? The Saudis have been making such investments for 30 years. How about Ghadaffi, Chavez, etc? Who has the low-down?

Shiveh:

Tom Mariner,

Burning oil is a wasteful habit. Through petrochemistry the value of the oil not purchased and burnt today, will increase several folds tomorrow. You’ll be doing the oil producing countries a great service by letting them keep their oil. Their next generation will certainly thank you.

the other john:

to john, yes alternative energies must be money makers to succeed

Tom Mariner:

Oh OPEC -- please reaffirm your determination to drain every drop of money from your accident of parking your country on top of rotten dinosaurs.

I come from a friendly country, the US, with a relatively short memory. But once it becomes clear, even to us, that you intend to capture every dollar in our banks, as a nation we will turn on our dual weapons of conservation and innovation. Yeah, I know that today we reward more folks that make rules than those that make inventions, but that's about to change, just in case you haven't watched our political conventions.

So after we dramatically increase our ability to move, heat, cool and entertain with no hydrocarbons, we will make sure the rest of the world gets to use it. And then your greed will have all of us wondering what the "O" in OPEC used to mean. And have you relegated to the status of those who used to broker whale oil for lighting.

So yes, please really, really mean it. And from our next generation thank you -- and I really, really hope you find something to do for a living once serious energy and conservation methods come on line.

John:

I strongly disagree with Lou. Prices are already high and that will not affect alternative energies. Why? 3 reasons, 1) Because alternative energies already make sense. 2 solar companies and more on the way, have already cut their costs to that of coal (which powers 50% of the USA). It is now just as economical as coal, and it's cleaner - which means demand for it will not cease regardless of oil prices that do not affect it. Wind is even more efficient than solar for the midwest corridor. The reason why it isn't implemented yet on a large scale is because the infrastructure is not there. Need more transmission lines which is a multi-billion dollar expense congress will have to make.
2) We are still running a trade deficit which deteriorates the US dollar. If we cut oil imports by switching to alternative energies, the value of hte US dollar will rise. This again makes sense to switch to alternative energies, as it boost the economy.
3) We just saw the dramatic effects of oil prices on the economy. People's memories may be short, but alternative energies are going to be every where in 10 years. People will not forget in just a few years, and that's already enough impetus to stimulate alternative energies. If you pay attention to the markets you already know hope is high for alt energies.

wpo:

So we are all wondering about the oil price.However this is not the real issue, allow me to sort of go off on a tangent, it turns out that the oil fields off Scotland, and also in the North Channel between Scotland and Ireland, contains an awful lot of oil and gas. So lets try to understand the relatioship between the world price for petrostuff, and that applied to the English markets, hello ?

Lou:

I hope they do cut the oil exports from Saudi Arabia. Yes, prices will rise as a result, but the longer the pain of high priced gas is in the market, the sooner that alternative energies will be developed. It's a high price to pay now, for a tremendous benefit to the world tomorrow. On the other hand, if oil prices drop, innovation will be stifled and it will take us longer to wean off of oil.

john:

you expect libya to not look for a better price for their oil because con. rice has been their business is business

pp:

The oil price would go down a little more. If not, the whole global economy would be dragged down by its (extended) expenses.

PostGlobal is an interactive conversation on global issues moderated by Newsweek International Editor Fareed Zakaria and David Ignatius of The Washington Post. It is produced jointly by Newsweek and washingtonpost.com, as is On Faith, a conversation on religion. Please send your comments, questions and suggestions for PostGlobal to Lauren Keane, its editor and producer.