As Dwight mentioned below, OPEC met today, in part to determine whether the previously proposed cuts in production would in fact be instituted. With gas prices soaring to record levels, and consumers grumbling, Washington has purportedly ratcheted up the rhetoric, calling for OPEC nations to forgo the production cuts.
So much for sending an oilman to talk to other oilmen. OPEC members agreed today to decrease production.
As I read the NYTime analysis of the decision, I was struck most by one of the trailing paragraphs, which seemed to be almost an afterthought on the part of reporter Simon Romero:
Few analysts believe, however, that OPEC will actually implement production cuts even if it announces such measures. For instance, it would be almost impossible for OPEC to immediately implement any cuts in April since its members have already committed to shipping oil to customers around the world next month.So if "those in the know" believe that OPEC is actually just bluffing, that they can't in fact decrease production due to production contracts, then why has the price of oil increased substantially since OPEC first announced the proposed cuts two months ago?
OPEC members argue that it's not even their fault. According to AP's reporting of today's meeting,
Although demand for oil in Asia and the United States has been unexpectedly strong, Naimi of Saudi Arabia blamed investors and speculators for pushing crude prices up to their highest levels since the 1991 Gulf War. Current prices "have absolutely nothing to do with supply and demand" for crude, he told reporters.Libyan Oil Minister Fahti bin Shatwan sought to deflect criticism of OPEC by claiming that the recent plunge in the value of the U.S. dollar has inflated crude prices by about 30 percent. He claimed that the real value of barrel of oil is around $20.
Taking a gander at the recently released quarterly reports of various oil companies, high OPEC prices don't appear to have put a dent in their profit margins, some of which surpassed previous records.
So if Saudi Arabia and Kuwait don't give a fig whether production cuts might spell the end of Bush's re-election plans, what about Bush's oilman buddies? Are they willing to reduce their own profit in order to throw a sop to the increasingly irate masses, looking to fix blame for the pain they feel every time they fill up at the gas pump? It seems to me that Ted Kennedy and others needs to rethink their own target when urging Bush to "jawbone" OPEC. Americans are more than willing to blame "feriners" for our economic distress, even when the true culprits are much closer to home. Bush and his cronies are plenty happy to play this game of bait and switch; Democrats are foolish if they don't understand that by simply enabling this ploy, and are in fact throwing away an immense opportunity, if they allow OPEC to become the bulls eye for US consumer ire.
Posted by MB Williams at March 30, 2004 05:33 PM | TrackBackRising prices at the pump have much less to do with OPEC or Saudi princes than good ol' American princes, uhmm, I mean, corporate executives and their ability to manipulate the market. See the Memory Hole's explanation at http://www.thememoryhole.org/corp/gas-prices.htm
Seems that a LOT of problems originate not on foreign shores, but right here. For instance, the same thing goes for prescription drug prices. Look at the drug companies, who are posting huge profits because Americans pay more for their meds than citizens of other countries.
Posted by: Jamie at March 31, 2004 04:06 PM