I'm watching this closely. In about eight hours, if my time conversion is correct, OPEC will begin meeting to debate cutting production of oil. It is being speculated that some countries within OPEC are already reducing production by themselves without OPEC's guidance.
Read on below:
From the Wall Street Journal:
OPEC ministers on Friday face their toughest decision in at least a decade as they weigh the depth of a likely cut in oil exports to reverse falling oil prices, even as the U.S. and Europe wrestle with the increasing likelihood of a wrenching recession.
The difficulty of the Organization of Petroleum Exporting Countries' challenge is apparent in some of the unusual theater of the cartel's emergency gathering here. Anticipating a long debate, the group's 13 ministers plan to meet early Friday, a departure from their more leisurely midday powwows.
All the delegates appear to favor an output cut, but intense haggling is sure to ensue over who should bear the brunt of reduced exports. OPEC furnishes the world with about 40% of its oil needs.
U.S. benchmark crude rose 3.7% to $69.20 at midday Thursday, up $2.45 on the New York Mercantile Exchange, in part in anticipation of an OPEC supply cut and amid a general recovery in assets of all stripes.
Iran and Venezuela have built their budgets around oil at roughly $80 a barrel, while even the flush Saudi Arabia is estimated to require around $55 a barrel to avoid deficit spending.
Iran's OPEC governor Mohmammad Ali Khatibi told reporters it was imperative for the cartel "to manage the market. ...When the price of oil is down more than 50%, if there is no management, I don't know what will happen."
The biggest wild card going into next year is China, whose heady economic growth now appears to be cooling. Any evidence of a sharper slowdown in China would likely send oil prices plunging even in the face of sharp OPEC cuts.
Mr. Khelil, who also serves as OPEC's president, joined a chorus of industry voices who are now warning that the credit crunch combined with low prices will cause a wave of delayed and shelved oil projects. Many observers fear the world could face a serious supply crimp within the next couple of years when a revived world economy begins to ask for more oil.
From the Telegraph (UK):
But fears of a deep cut in production receded amid signs that some members of the 13-strong group believe that a higher oil price will reduce further demand by the major consumer nations.
Opec president Chakib Khelil said on Thursday that his organisation, which accounts for about 40pc of oil production, would take care not to worsen the global financial crisis.
He said: “It’s a concern that we could make the financial crisis worse by taking too strong a reduction,” adding that the decision “should not impact the world economy which is already in pretty bad shape.”
Thursday’s talks in Vienna will be followed by a further meeting Friday to ratify the agreement. It is thought that Opec hawks such as Iran and Venezuela are pushing for 3m barrel a day reduction, taking daily output down to about 43m.
But Opec kingpin Saudi Arabia wants a smaller cut, believing that a jump in the oil price will be self-defeating and force consumers in Europe and America to reduce demand.
Analyst John Hall, of John Hall Associates, said: “My feeling is that there will be a cut of 1m-1.5m barrels, leaving Opec to sit back and watch what happens to the price. I would not expect the price to react strongly to such a cut.”
The price of crude has more than halved since it reached a record $147.2 a barrel in July. Some Opec members, especially Iran, fear that their economies will suffer through the drop in revenues.
As you can read above, the main advocates for steep cuts are Iran and Venezuela. I'm not surprised. Saudi Arabia is the voice of semi-reason, again not surprising. But, this is bigger then all of that. The sheer fact that our transportation industry, our economy in general, and our very livelihood depends on a group of foreign nations, that many of which hate us, is completely wrong.
It is time for this nation to get off our addiction to foreign oil, and move forward with other resources that we have plenty of. Our own oil, our own natural gas, ethanol, wind, hydro, solar, and nuclear are imperative to develop.
We had a President once, who through sheer will committed us to a Space Race and won. Why can we not have a governmental initiative that states in 5 years we will reduce our imported oil demand by 40%, and within a decade by 80%. Everyone of our auto industries must produce a compact, mid size, and large car that gets at a minimum 50 MPG. I want them hybrid at a minimum and preferably developed to be fuel cell long term. Here's a catch also, you produce it, Ill guarantee you I'll retool the entire federal fleet of vehicles with these new vehicles. Ill buy your first 200,000 off the assembly line.
What if we developed wind farms, solar farms, and safe nuclear plants around the nation, that produced 50% of our power demand? What if we switched over to clean coal in the short term?
All of this can be done. It takes someone to say do it though. The one thing that is sure though, if we continue leaving ourselves open to OPEC, it will be our Achilles heal. It is a Vital National Security Interest to get off foreign oil.
God Bless America
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