Opec will cut production

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Dave S

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Oct 3, 2006
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Now that the price of crude is dropping like a rock, OPEC has announced it will cut production. http://abcnews.go.com/Business/wireStory?id=6101634

The economy is on the brink of a major collapse world wide and the one bright spot, the lowering of the heretofore outrageous crude oil prices, will now result in the greedy OPEC countries trying to create shortages to drive the prices back up. So what else is new?

:smt021:smt021
 
Announcing a production cutback, and it actually happening, are not the same thing. In the past, OPEC countries that needed the oil revenue to prop up their regimes, such as Iran, would quietly overproduce their quota. Now I suspect Mr. Chavez in Venezuela will do the same. About the only oil producing (and exporting) countries capable of cutting back their production enough to make a real difference on the world markets are Saudi Arabia and Russia, and Russia is not an OPEC member.
 
Well, the market response was a giant yawn. Oil is down 4.7%, below $65. Interesting how the oil market works when the speculators are out of it. Outlook for global demand is grim, so the price falls. Huh, what a novel concept, supply and demand.
 
What Tim said. The market sees demand falling faster than OPEC is cutting. The price of oil isn't a worry right now.
 
Time to either bomb them, or get alt fuels going.
 
Certainly, I think it is clear now that speculation, and not "true" demand, drove the oil to $140 this summer.

But I think the economic outlook is pretty grim at the moment. I am starting to see delays in existing capital projects and "postponements" in projects that were being fast tracked a few monthes ago.

I suspect that the potential slowdowns in the Far Eastern economies will probably have a bigger impact on the price of oil than anything we are doing domestically.
 
I recall oil dumping like hot cakes when the republicans started chanting "drill baby drill". Once speculators heard that, "sell baby sell" was heard on wall street.
 
As far as what OPEC's cut may do to the market, I generally agree with the comments posted here insofar as not having to worry about it. But the fact they are "trying" to influence pricing is what bothers me especially in light of the world economic crisis.

BTW, I know I have shown this chart before but it's worth looking at again. The price of fuel has varied pretty widely from the price of crude during the past year when compared to previous years which is another headscratcher. Theoretically gasoline could have been priced a lot higher in the last year so who knows how gasoline pricing will change when crude starts to rise again.
GasChart.jpg
 
Independent of the barrel cost are refining costs, transportation costs, distribution costs, profit at the gas station, etc. They stay near constant so the total cost doesn't vary by a simple ratio. Uh... oh... this sort of sounds like fractions and addition...
 
The original post stated "The economy is on the brink of a major collapse world wide"

No it's not.

That maybe so according to Good Morning America & the rest of those talking head puppets but its nonsense. Lets remember they are goal driven entertainment programs. Not informative broadcasts or even "news" outlets.

Lets also remember some basic economics and the fact that the value, (or lack there of), of the American Dollar has more to do with the "world economy" than the price of crude oil. Ever wonder why oil prices are measured in dollars? Its because its the most stable form of currency readily available world wide.
 
mwph said:
The original post stated "The economy is on the brink of a major collapse world wide"

No it's not.
Click to expand...

Care to elaborate, or state why you say that?

I would like to think the recent $700B bailout / buyout by the U.S. Gooberment was prompted by something in the economy not working right.

My take, based upon what I see, is that things are not coming up all roses in the U.S. economoy. I can't comment directly on the World Economy because I don't see that directly.
 
comsnark said:
I would like to think the recent $700B bailout / buyout by the U.S. Gooberment was prompted by something in the economy not working right.

I would like to think that too because "something not working right" can be fixed.

Sad fact is that financial instutions buzzard like behavior (ie... intentially lending money to those people, and small companys for that matter, knowing full well that it could never be paid back by anyone other than the U.S. government) was the root of this "crisis". Its just hard for me to refer to a planned outcome as a crisis. Their fraudelent mispreprentations of themselves further enhanced and prolonged the economy's abliity to naturally bring the problem to the surface.

Any economy will work perfectly until it is tampered with so severly that it passes the point of no return. At which point society looks to the entity with the most money to fix it.

This of course brings us back full circle to the value (or lack there of) of the U.S. Dollar. When the Government spends tax dollars paying back defaulted loans the rest of the world recognizes that we have no respect for our own dollar.
Click to expand...
 
Ok. . not sure I disagree with any of what you said.

I would comment that the "buzzard like behavior" you refer to is having an unplanned outcome that is bad for the overall economy. . .and that the problem is rippling around the world.

Although, I find it interesting that in the midst of this "event" (since it is hard for you to call it a crisis), the US dollar is actually rising against most other currencies; particularly the UK pound. That says to me that despite the highly inflationary moves the US government is taking (i.e. huge bailout), the rest of the world thinks the odds of the US being a "better" place to park money is pretty good.
 
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