11/13/2008 05:12 am ET | Updated May 25, 2011

While The World's Economies Are Reeling, OPEC Wants Us To Pay More For Oil

In November of 1999, in a speech to the Houston Oil Forum, Saudi Oil Minister Ali al-Naimi bragged that the "all inclusive" cost to the Saudis to produce a barrel of oil was less than $1.50 a barrel. Costing $1.50 then you can make your own extrapolation as to what it may cost today. My estimation is it is less than three dollars today, and probably a lot less. My reason for putting forward this tidbit of information is to give one a comparative benchmark of production costs of other OPEC member states be they Libya, Kuwait, Iran, Algeria, etc. All would be comparable to Saudi production costs. As to the argument that today's oil price reflects a rapidly declining resource, I have long argued that OPEC's and especially Saudi Arabia's reserves have been purposely understated and are vastly greater than we have been led to believe (among other posts please see "Peak Oil" RIP: Official Obit Front-paged In the New York Times," 3.8.07)

With the current rout of speculators pulling in their horns from the commodity markets and the economy's impact on oil and oil product consumption, and finally the growing and widespread realization of the environmental and national security dangers inherent in fossil fuel consumption, the price of oil is collapsing. Or is it?

With the price of oil retreating from its high of $147/bbl we heard from the oracle of oil patch baloney, Chakib Khelil, OPEC's President and chief cheer leader. Khelil, who had called for an emergency OPEC meeting for November 18th, a month ahead of schedule, was quoted by Bloomberg on October 9th that prices have fallen "dramatically" and "The decision will very likely be to cut production."

Now consider this. Even with oil prices' recent tumble to $80 a barrel, using Al-Naimi's 1999 Houston Oil Forum's formulation (all-inclusive production costs of less than $1.50 then, extrapolated to $3.00/bbl now), we are still dealing with a breathtakingly obscene markup of 2500% -- this while the world's economies are on the brink of depression. But having tasted the nectar of a 5000% markup when prices were at $147/bbl while holding the industrial world and the world's economies to ransom, the OPEC cartel has lost all bounds of reason and simple commercial common sense, which dictates a shared responsibility and communal well-being between industrial consumer and materials supplier. In their actions, and OPEC's volition to keep prices at artificial and egregiously high levels at a time of potential economic disaster for their customer base, they have forever lost all semblance as suppliers who can be relied upon in good times and bad. No matter how inexpensive and accessible their wares become and how tempting for us to become hooked all over again it is long past due to get the oil monkey off our back once and for all.

Greed may well be a universal human failing. Its contribution to the dimensions of the present world financial crisis does not diminish the outrage we feel in its numbing excess. It is an outrage that now needs be extended to the OPEC cabal and their oil patch allies as well.