Iran, Venezuela Push for Higher Oil Prices

OPEC Tries to Stay Relevant

Schork believes that speculators had a major role in the run-up in oil prices and can also profit from a quick fall in prices.

"If we can go from $75 to $150 in a few months time, there is nothing to stop it going down -- or lower -- just as fast," he said.

He says OPEC's move this morning was a warning to speculators not to liquidate their holdings.

Phil Flynn, senior energy trader at Alaron Trading Group, said OPEC made a big mistake.

"They're going to be seen as piling on to a world economy that's in turmoil right now. This production cut is going to politically backfire on them," Flynn said. "If this global economic slowdown becomes more prolonged, OPEC is going to get their share of the blame and they should. They're withholding supply from a market that still has oil prices above $100 a barrel."

Cost of Rising Gas Prices

The move is the wrong decision at a time when Flynn said "the world is trying to wean themselves off their product."

"I think they are very short-sighted," he added. "If they looked at the big picture, they should be encouraging lower prices right now because lower prices would slow down the move to alternative fuels and would help the world economy rebound faster, suiting them better in the long-run."

Flynn says OPEC wants to send a message to the market that it still controls the flow of oil.

"They are trying to say: Hey, we still matter," Flynn said. "I think they are panicking right now because demand is falling and they're afraid that prices will collapse."

More Pain at the Pump

For Americans, the price at the pump has fallen from an average of $4.11 on July 7 -- an all-time high -- to $3.65 this week. That's an 11 percent drop in nine weeks; but gas prices are still 83 cents a gallon higher than they were a year ago. OPEC's decision could stop the recent fall of gas price in just a week or two.

The 13-member oil cartel sets limits every few months on how much oil each member nation can produce. In June, Saudi Arabia decided to go 500,000 barrels a day above its quota to help keep oil prices in check.

The move came after President Bush flew to the Middle East in May to lobby the royal family in the hope of giving Americans some relief from high gas prices. At first, Bush was rebuffed in his request, but a few weeks later King Abdullah met Bush's demand for more oil and even went one step further, increasing output more than Bush had originally sought.

Today's move by OPEC essentially forces the Saudis to remove that extra oil from world markets and go back to their November 2007 production levels.

The move is part political and part economic.

Giant OPEC Profits

OPEC nations have seen enormous profits from the record oil prices. Now as the price of crude has plunged the countries want to protect that windfall.

"I think it's true to say that Venezuela and Iran did not want to see the price of oil fall below $100," said John Hall, managing director of John Hall Associates Ltd.

Hall was also in Vienna for the meeting and said that this move will hurt Saudi Arabia and the world economy.

"It's the oil price increase that hits world economic growth more than anything else," Hall said.

Oil prices were little changed in response to the OPEC decision, puzzling analysts including Hall. Oil was actually trading down about a dollar mid-day today.

"We thought the price would go up but it has barely moved," Hall said.

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