OPEC’s starting to tick me off. First they say they are ‘unhappy’ about high oil prices. Then, Bloomberg.com reported recently that OPEC’s President is predicting oil to go to $170 per barrel by the end of the year:
OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar’s decline and political conflicts.
“Oil prices are expected to reach $170 as demand for fuel is growing in the U.S. during the summer period and the dollar continues to weaken against the euro,” Khelil said today in a telephone interview. The leader of the Organization of Petroleum Exporting Countries also serves as Algeria’s oil minister.
I’m skeptical of this assertion because oil is up over 54% so far this year, while the dollar is down about 7.5% against the Euro. Unless I’m not understanding exchange rates, the dollar’s fall can only be attributed to a 7.5% rise in the price of oil. The rest is either due to supply and demand or speculation (though as Meg wrote this morning, that might not be the case). I doubt that the Fed will continue to allow the dollar to fall. I’m also skeptical of Khelil’s claim of rising demand in the U.S. throughout the summer. I bet we’ll see a drop in demand as some people just can’t afford to drive anywhere.
It bugs me when these guys come out and say stuff like this. It almost seems to be a self-fulfilling prophecy.