October 16, 2008

Oil prices fall - OPEC in a panic

According to this article from the New York Times, another big drop in oil prices today - with oil falling below $70 for the first time in 16 months - set the oil cartel OPEC into a tizzy, with the cartel deciding to hold an emergency meeting next week. (OPEC calls the Oct. 24 meeting an "extraordinary meeting", but is it extra-extraordinary since November's regularly scheduled extraordinary meeting was hastily moved up a month?)

The second paragraph of the article is interesting: The rapid decline in prices had alarmed petroleum executives and oil producers who are becoming increasingly nervous that it is undermining the stability of energy markets.

Falling prices will undermine the stability of the energy markets? That implies they were stable to begin with. Going from $70 to $100 to $145 is no more stable than going from $145 to $100 and back to $70. Except when prices are going in reverse consumers benefit from lower gas and energy costs - and so does the economy as a whole. Toss in a few billion gallons of ethanol and a growing renewable fuels sector and we're on the right track.

But oil company execs want "stability" - which apparently is a code word for "high prices" and "record profits". They want this "stability" to so they can invest over the long term. If only the world were so perfect. After all, wouldn't everyone want this form of "stability"?

Anyway, expect the oil cartel cut production, maybe by a million barrels a day. Good thing we have a domestic renewable fuels industry - which is already replacing some of that oil.


  1. it's amazing how qucik they (OPEC) forget that at the beginning of the crisis, oil was at $37 a barrel. Now that countries like Iraq and Venezuela are not making the windfalls profits they have enjoyed at the expense of the American people, they want to cut production and try to hold the price near $100 a barrel. Gas prices are quick to rise but slow to fall, which seems to be a clear sign of greed from the big oil companies and gas station owners.

    Consumers need to continue to reduce our consumption of oil/gasoline and send a strong message to Big oil and OPEC.


  2. In 2003 OPEC was hopping to keep oil around $25 a barrel because that was a good price and a level they could be very profitable at. Check out http://www.time.com/time/world/article/0,8599,1715308,00.html?iid=sphere-inline-bottom

    But once you get addicted to the greed it is hard to stop.