OPEC (the Organization of Petroleum Exporting Countries supplying over 40 percent of the world's oil consumption) feels put upon. It's Secretary General lashed out at the International Energy Agency for having categorized current oil prices as "alarming", calling for OPEC to show more flexibility in boosting supplies. OPEC's Secretary General Abdalla Salem El-Badri immediately countered that "At the moment there is more than enough oil on the market... Oil prices have been driven by technical means... the weak dollar and speculation" all the while critical of the IEA for warning of the risks to economic growth due to rising oil prices.
It is significant that El-Badri's comments come while OPEC's official output quota has remained unchanged since instituting a record cut in its production in December 2008. December 2008 was a fateful moment for OPEC and the price of oil. At the time oil was hovering around $40/barrel and OPEC and its minions in the oil universe were rattled, to say the least. Even the Saudi monarch, King Abdullah got into the maelstrom by promulgating that he considered $75 a barrel to be a "fair price."
But with the price at $40/bbl we were summoned to a far higher calling. You see, according to that font of wisdom on all matters oil, Saudi Oil Minister Ali al-Naimi instructed, "You must understand that the purpose of the $75 price is a much more noble cause. You need every producer to produce, and marginal producers cannot produce at $40 a barrel."
That was then, and the price was $40/bbl. This is now with West Texas Crude selling for over $90/bbl and London Brent crude selling just under $100/bbl at $98/bbl. More than a doubling of price since December 2008, shooting past Al Naimi's "noble" and King Abdullah's "fair" price of $75/bbl months ago.
The IEA opined in a report last Tuesday that OPEC would need to pump 400,000 barrels per day more than expected this year to balance the market. El Badri said OPEC would respond if there is a need for more supply. "OPEC", he reiterated "as always, is watching the market carefully. We remain committed to market stability."
Translation. OPEC is prepared to do little or nothing to help reduce the current level of prices. Their lack of willingness to hold the price at moderate levels gives the speculators a one way bet on ever higher prices.
What if El Badri had said in response to the IEA, "Yes we agree with you, current prices are alarming and a risk to the world's economy. Especially at levels so significantly higher than the $75/bbl we consider to be "fair". We will do what we can to rectify the situation. As you are aware Saudi Oil Minister al Naimi has at his disposal some 4.5 million barrels per day (bpd) pumping capability which are being held idle and on standby. Certainly he and all of us at OPEC will do our utmost to bring about a price which we consider as "fair" and tolerable to the world's economy."
Don't hold your breath, but were it to come to pass it would send the speculators running for the hills and evolve an entirely new relationship between oil suppliers and consumers around the world, one of mutual respect and true interdependence.
One last observation. We in the United States are by far the largest consumers of oil in the world. Yet we have done little or nothing to significantly reduce our oil consumption and to politically confront an intransigent OPEC with the authority and interplay that an industry's largest consumer normally has on the sway of a given industry's outlook and policies. We have been silent and have permitted our Department of Energy to remain mute while prices have escalated by well over 200% or $1 billion rent a day on the nation's economy ($90/bbl plus today -- $40/bbl December 2008 = $50/bbl x 20,000,000 bpd US consumption= $1 Billion/day). Or more to the point, gasoline at well over $3.00 a gallon.
We have permitted our oversight agencies such as the CFTC to stall and equivocate rather than bring massive and destructive speculation to heel. The lack of meaningful oversight and action by our government agencies is exemplified by a Department of the Interior and its Minerals Management Service whose ineptitude has already bequeathed to us the massive Deepwater Horizon oil spill disaster.
Where is our national policy on this issue? We not only owe it to ourselves but to oil consumers throughout the world who are paying a heavy price in part because of our lack of meaningful leadership.
Thank you for your informative article. I think El Badri and others would be concerned if gluttonous Americans understood the context of your article and could reduce their consumption by just 10% to send a message to the Middle East and the speculators.
We are currently using no more oil, or gasoline than we were one year ago, yet the price continues to go up. A healthy reduction in consumption of 10% in America as China and India are facing accelerating inflation would bring the price of oil down to $35 per barrel and send some greedy speculators running for the hills.
Jim Worth
Author, "Final Audit"
Just because American producers were foolish enough to pump all their oil in a span of a few years does not meant that OPEC producers are that stupid. Based on broad hints from most OPEC and non-OPEC producers, it appears most are indeed trying to prolong their wealth as long as possible. This is one of the things that gets lost in all the rhetoric about Iran ... Iran wants to use nuclear energy so they can minimize their usage of oil-based energy, saving their remaining oil for export at maximum prices.
Basically your pipe dream of oil at $35 is a delusion. There is NOT enough oil left on the earth for that to ever happen, unless we all go back to living like the early 1800s.
Sara Palin or porn has more readers and comments in 15 minutes than life threatening loss of oil-based energy gets in 24 hours!
This is why I am soooo pessimistic about America.
America has a KNOWN BAD future ahead of it, yet we argue about trivial matters and ignore reality. All I can do is prepare myself.
you might have heard about. Then back to $30/bbl oil is a real possibility.
If 1 bbl cost $50 and 1 million people bought one you make 50 million
They try to keep oil at a price were they make the most money
The 10,000 watt Nickel Hydrogen module is stated to be en-route to mass production. The initial market focus is industrial applications. Capital cost is projected to be highly competitive at just over $2,600 per kW.
They claim it could be used to produce electricity at a cost of 1 cent per kWh (and even less where only heat is needed).
Output energy was more than 14 times the input energy.
This appears to be a Low Energy Nuclear Reaction (LENR). Cold Fusion is likely a misnomer.
LENR is the first revolutionary energy technology to surface as this New Year begins. Other out-of-the-box systems, perhaps even more difficult to believe, are likely to follow. None are yet adequately proven. However, this one increasingly looks real.
Another very promising example is fractional Hydrogen. A system under development has the potential to allow very small quantities of water to replace diesel fuel for stationary generators - and power hybrid automobile and truck engines. Cars are expected to travel 1,000 miles on a gallon of water.
See Moving Beyond Oil at: www.aesopinstitute.org
Breakthrough technologies promise to be the most practical way to lower the price of oil.
Hydrogen is only an energy storage media and a not very efficient one at that. To get hydrogen, you either have to crack it from hydrocarbons (oil) or use lots of electricity to break the hydrogen and oxygen bonds in water. Both techniques require more energy that is eventually released when the hydrogen is "burned." This is basic chemistry, thermodynamics and physics, all of which are pretty much well know and cast in stone.
Trying to ignore the basic laws of Chemistry, thermodynamics and physics is not only stupid, but delusional.
A one Megawatt power plant will follow as fast as production can allow.
Hot fusion has wasted untold billions if these statements prove accurate.
Textbook science has become dogma that the world can no longer afford.
Experiment always trumps theory.
Had scientists been more open the chances are good that several breakthroughs that are now slowly moving toward the market would have already been there.
The stone you mention is what should be wise gray matter.
As events unfold, the Italians, whatever their failings, may have given the world an urgently needed wake-up call.
That being said, ther are some newer reactor designs that are much safer and more efficient then the traditional US light water design. It is also very likely that even better designs could be developed if enough money is put into research (reactor research has essentially bene dormant for decades).
Also if we want to extend the supply of uranium, we could build breeder reactors that generate more fuel than they use, but they have as a byproduct stuff that makes more efficient and smaller fission bombs, something many people on earth are very afraid of.
Note though that many of the oil producing countries are now building nuclear power stations and large solar plants, so that their own energy needs are met with nuclear and solar power and most of the oil they pump is sold at high profit to the suckers in the US that refuse to convert to non-oil energy. Check out the UAE's plans.
The reality you and so many others can't seem to understand is THERE IS NO OIL left in the US.
Why do you think we are drilling THREE MILE holes into the ocean floor that is under ONE MILE of water? It isn't because the oil people want to do that, but because there is no more oil on land, NONE.
The US oil production PEAKED in 1970 and all the new wells do not produce enough to offset the decline in all the old wells.
The US now imports about 75% of its oil and no matter how much we dill in the US, that number will NOT go down very much. The highest estimate is 5%. That is, if every square yard of the US is drilled, the US would STILL have to import 70% of its oil at world market prices.
Between their lies and our magical thinking that the earth is made of unlimited coal & oil, we will not be able to avoid energy based hardship.
Let's stop expecting our oil suppliers to indulge our needs over theirs- if we don't pay $100/ bbl, other countries will.
As the dollar loses its value, the counties with crates more dollars than they want, will quietly switch to other currencies.
The major changes needed will be new commuter cars that you will be required to use if there are less then two people in your average daily commute that has a better the sixty miles to the gallon using either gas, electrical or both to accomplish this. A huge heads up to auto manufacturers, this will be a harsh demand by 2015 so get on it now. Comfortable, safe inexpensive cars for daily commute backed by a fifty percent tax write off when you buy one and a harsh fine if you do not. Then expansion of public transportation but larger a change for transport trucking up to twenty miles per gallon using diesel electric power plants.
America may not be able to control commodities and oil prices but we can use innovation to allow Americans not to have to pay the inflated costs. Added to that will be price controls on all oil companies operating in the USA. A fair price and profit but no more stealing from the very country and people that made you.
This is your choice, stay the course and go broke or jump onto a new party that is pro American.