November 21, 2008

OPEC afraid of losing its credibility amid lower prices

Chakib Khelil, president of the oil cartel OPEC and the Algerian oil minister, is afraid of OPEC "losing our credibility" if the cartel decides to cut oil production (again), but then finds out that members ignored the last agreement to cut production.

What Khelil may fail to realize is neither he nor OPEC were credible to begin with.

Khelil, if you recall, is the individual who said that "the intrusion of bioethanol on the market" is responsible for 40 percent of the increase in oil prices back when oil prices were sky high. (Click here.) Yes, he's that guy.

OPEC said in September it was going to cut production - because oil was getting too close to $100 per barell. Nervous that September's cuts didn't work (or didn't actually happen), OPEC was in panic by October, when it held an emergency meeting to cut production again. Oil was $70 then.

Guess what? Oil is now around $50.

Below is a good line from an AP article, which you can check out here. It's the same article that quotes Khelil being nervous about the cartel's credibility. No joke.

If the cartel's earlier complaints about low prices elicited few tears in much of the world, the latest drop is even less likely to merit a sniffle.

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