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Yeah Right – OPEC Is Unhappy with Recent Surge in Oil Prices

By JLP | May 23, 2008

I was at a track meet this morning. My youngest son ran two events and did pretty good. They won the first relay race but didn’t do quite as well on the second relay race. It was fun but I forgot to wear a hat and now my forehead feels crispy.

Anyway, I find this very hard to believe:

OPEC unhappy with oil price surge.

What idiot is unhappy when the price of the good they are producing increases?

If they are really that unhappy, why don’t they produce as much oil as they can? Either they can’t because they are already maxed out or they don’t want to increase supplies. Either way, they’re lying if they say they are unhappy with the current price of oil.

I wish the US would quit dragging their feet and get us some alternative fuel sources (BESIDES ETHANOL) already!

Topics: Biofuels | 15 Comments »


15 Responses to “Yeah Right – OPEC Is Unhappy with Recent Surge in Oil Prices”

  1. Nick Says:
    May 23rd, 2008 at 3:33 pm

    Well, maybe $12/gal would help.

    You are right, ethanol is not the answer.

  2. Jay Says:
    May 23rd, 2008 at 3:56 pm

    Yea, I’m kinda worried that we’re going to have our version of the potato famine someday. Imagine some sort of blight attacking corn crops! Crazy.
    I suspect the big profiteers these days are the speculators, which our government could do something about if they wanted to. hopfully something will change-soon.

  3. theCase Says:
    May 23rd, 2008 at 4:03 pm

    No expert by any means, but my understanding is if oil prices get too high, the world goes into recession, decreasing the demand for their oil. It is their best interest to have a well-behaved, stable world economy for their product.

    Sorta like a “Laffer curve”, i.e. there is an optimum price for oil.

  4. Lily Says:
    May 23rd, 2008 at 4:05 pm

    I can think of at least one reason why OPEC would not want extremely high oil prices: This would hasten demand for, research into, and adoption of alternative fuel sources which would undercut future OPEC profit. The prospect of potential competition is a legitimate reason to fear unreasonably high prices today, even if those prices are highly profitable for the cartel.

    Moreover, I tend to believe Badri when he says undersupply is not the cause of the problem. I agree that speculation and a weak dollar has played a large part in rising oil prices. If he is correct that increasing supply would not ease prices, then there’s another reason for OPEC to be unhappy. Its power (the power of any cartel) is derived from the ability to set prices. If its actions (controlling oil output) has little impact on prices because speculation or foreign exchange fluctuation dominate price movements, then the cartel has no power. That’d make OPEC plenty unhappy.

  5. Joey Says:
    May 23rd, 2008 at 4:14 pm

    I think they might be worried that rising costs of fuel are driving people to really consider alternative fuel sources. OPEC nations fear alternative fuels because they are so reliant on oil for their economies. I also agree that Ethanol is not the answer. We need farmers to be producing more food crops, and not devoting land to fuel crops. As world populations rise, food and fresh water will become highly sought commodities. Get in on the ground floor by investing in desalination plants and Soylent Green research.

  6. JLP Says:
    May 23rd, 2008 at 4:15 pm

    Lily,

    Once again, you make some excellent points.

  7. Lord Says:
    May 23rd, 2008 at 4:22 pm

    As Europe already has had $9+ per gal for some time without alternatives (other than public transportation), don’t expect anything soon.

  8. Dave Says:
    May 23rd, 2008 at 5:58 pm

    To Jay: What could our government do about foreign speculators purchasing oil futures on foreign exchanges?

  9. Benjamin Says:
    May 24th, 2008 at 3:49 am

    I can’t speak for OPEC, but for myself (an employee of Chevron Texaco) I hate it when the price of oil rises.

    People assume because I work in the oil business that I’m delighted when the price of gas and oil goes up because it means more money for me!

    Of course it doesn’t work like that, the raises that I have received over the last couple of years have not kept up with the rising cost of energy, food, clothing, etc.

    Not am I suffering along with everyone else, but everyone else think that “I” am to blame!

  10. Phil Says:
    May 24th, 2008 at 5:30 am

    I think OPEC is concerned about the *reason* for the dramatic price increase. It isn’t an abnormal spike in demand or lack of supply, but a speculative buying frenzy of future production by investors. I had read that the spec investing is responsible for something like everything above $80-90/bbl.

    OPEC likes stability, and predictability (as would any one in a commodities business) and this recent frenzy has all the signs of a big fat bubble which will collapse like 17th century tulips.

  11. David Says:
    May 24th, 2008 at 11:57 am

    Is the rising oil costs a supply/demand issue or a case of dollar devaluation. Things like this might force oil pricing to the Euro.

  12. mbhunter Says:
    May 24th, 2008 at 12:12 pm

    I imagine they are quite unhappy.

    They probably aren’t resting well. They are well aware of how this is hurting the US, and they’re going to see enormous pressure to Do Something About It even if they are pumping it out as fast as they can (which I tend to believe is the case).

    Would you feel a bit unsafe if you had an angry, envious world breathing down your neck and calculating in the back room how they could control your oil for themselves? I wouldn’t want to be in their shoes.

  13. Steve Braun Says:
    May 24th, 2008 at 1:57 pm

    Even if all the oil producing countries increased output by 50%, the fact remains that U.S. refineries are already operating at nearly 100% capacity. We can’t make gas any faster no matter how much oil is available. That’s one reason why we pay so much at the pump.

    Alternative fuels is an answer for the very, very long-term. The fact remains that oil is still a relatively cheap and powerful source of energy and will likely remain as such for some time to come. Beyond that is anyone’s guess.

    Given that, we ought to be building more refineries and doing our best to make the most of the energy resources in our own backyard. It is ridiculous for our president to go begging in the Middle East for more oil production when we are sitting on top of some of the largest oil reserves in the world.

    What boggles my mind is that there are enough proven oil/coal/natural gas reserves in the U.S. to meet 100% of our energy needs for at least another 50 years (some say even more). These energy sources remain off-limits to any exploration or extraction mostly for political reasons, rather than anything scientific or environmental.

    Technology today is much better and we have tougher envirnonmental controls. The result is that we know how to extract such resources safely with minimal environmental impact. Yet, there are many who operate on a knee-jerk basis when it comes to the energy business. (For example, notice how France easily and safely uses nuclear technology for energy while we remain frozen in the dark ages by China-syndrome scare tactics.)

    We need to get off our collective rear-ends and make the most of what we’ve got — good, proven, clean, cheap sources of energy — while we continue to work on the alternative sources that will power our nation down the road. We can and should do both. Why aren’t our politicians doing anything constructive about it except whining about “Big Oil” and subsidizing ethanol (which is NOT the future)? They need to be held accountable for retarding energy exploration and production with their stupid policies.

    And no, I do not work in the energy or automotive industries.

  14. Foobarista Says:
    May 26th, 2008 at 2:20 pm

    Oil at $50/bbl will keep us in the Petroleum Age for a long time. Oil at $150+/bbl will force the march past it, as it already is. There’s more innovation in cars now than at any time since the days when Woodrow Wilson was President.

    OPEC’s big fear is that they’ll get a massive spike of income for a decade or so, followed by a collapse as dozens of technologies come on line that collectively would end the Petroleum Age – and force most of them to confront the fact that without oil, most of them aren’t really set up to compete in the world. They can live off their oil revenue for awhile, but after that, they have to build real economies that involve people doing economically productive tasks, not digging stuff out of the ground.

  15. Aeron Says:
    May 28th, 2008 at 11:49 pm

    “No expert by any means, but my understanding is if oil prices get too high, the world goes into recession, decreasing the demand for their oil. It is their best interest to have a well-behaved, stable world economy for their product.

    Sorta like a “Laffer curve”, i.e. there is an optimum price for oil.”

    You’ve got it backwards. By increasing demand they INCREASE PRICES that people are willing to pay to get the product. NO BUSINESS in their right mind would lower prices just because more units are selling.

    Aeron

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