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Many of the members nations were planning their economies to run on $75bbl oil - not $45 (http://www.google.com/hostednews/ap/article/ALeqM5jahLORCRUTIr2xXWdJy4zje7_PIAD954DEL01)

http://www.cleanmpg.com/photos/data/501/Saudi_King_at_OPEC_minister_meeting.jpgGeorge Jahn - AP - Dec. 17, 2008

Interest rates may have just hit bottom, but not oil. :( -- Ed

Oran, Algeria — Saudi Arabia, OPEC's de-facto leader, said Wednesday the group will slash a record 2 million barrels from its daily production, while Russia and other countries said they would join in the effort by removing hundreds of thousands more barrels from the market.

Saudi oil minister Ali Naimi said there was an OPEC consensus ahead of a formal agreement later in the day for the cut.

An official decision to cut 2 million barrels from output all at once would be a first for the organization. OPEC had cut that amount from its output four years ago, but that was done in two stages.

Also significant would be formal support from Russia, Azerbaijan and other non-OPEC producers. Mexico, Norway and Russia slashed production in the late 1990s, at a time oil was selling for about $10 a barrel… http://www.google.com/hostednews/ap/article/ALeqM5jahLORCRUTIr2xXWdJy4zje7_PIAD954DEL01

Hi All,

The Saudi Oil Minister was on 60 Minutes a few weeks ago. He said their goal was $75/barrel oil.

Jayman over on Prius Chat, who is an oil industry insider, with tremedous knowledge of refining, has said anything less than $80 / barrel will be unprofitable for North American produced oil.

So, is this a dumping attempt by OPEC to shut down the Canadian and Mexican Oil production? Are they taking advantage of the economic situation in North America to eliminate competition? Seems like it to me.

What happens when the economy rebounds in 3 or 4 years? There wont be any of the local production in play, and oil will sky rocket. The Saudis will cash in for a few years with $100+ oil, like they did in the last few years, and the cycle will repeat.

This likey scenario has to reinforce the need to minimise oil consumption for strategic, if not tactical, economic reasons. With so many jobs leaving North America for China and India, can we really afford to send what money is made to Opec by driving inefficiently in inefficient vehicles? Would it be better to send that money to our neighbors who will be building next generation efficient vehicles or our country's infrastructure? Is now the time to phase in a significant federal Crude Oil tax on Non-NAFTA Supplies ?

I share donee's suspicions/concerns. They have us over a barrel...

Seriously, we must restructure our transportation energy economy or this cycle will continue.

It seems to me that this is probably for the best. I doubt that we peasants would stomach a heavy import tax on oil (much less the big producers) but the price has got to go up if we are to continue what progress we have made. At $1.50/gal, nearly anything seems economical compared to even the most efficient of cars when gas was $4.00. It's not like many people are in a position to buy cars at the moment, but we need to ensure that those entering service are as efficient as will get the job done.

As donee points out, we don't want to be caught with our pants down when the economy picks up and we need more production. The price has to be high enough now or else it won't happen.

I doubt that we peasants would stomach a heavy import tax on oil (much less the big producers) but the price has got to go up if we are to continue what progress we have made.

In a completely rational world, it's obviously better to raise the price domestically (gas tax, carbon tax, whatever) so that we can generate revenues to finance a transition (EV, mass transit, whatever).

But politically I've come to see the value in having "them" do it via supply cuts instead of us. Washington can advance the same transition with other resources while blaming the Saudis, others & deflecting political heat.

It's not unlike Castro deflecting the heat of his failed economic system by blaming the embargo.

Sounds to me as if they are cutting off their nose to spite their face.

Cutting 2m barrels of oil will still take time to make any profits on a global scale. Our gas prices would gradually go up, but in the meantime OPEC is losing $90m dollars a day in revenues. It could take months to get the price of oil back up to a point where they make up those losses. And as consumption goes down the demand for production will drop some more.

So at some point, when the barrel of oil hits $500 per barrel, Consumers will either go to work riding horses or we will have another war. :flag:

So, is this a dumping attempt by OPEC to shut down the Canadian and Mexican Oil production? Are they taking advantage of the economic situation in North America to eliminate competition? Seems like it to me.



Quick answer: No.

If OPEC wanted to dump oil, they would keep production as is and not lower it.

OPEC is trying to deal with the extreme drop in crude oil pricing world wide. There isn't much doubt that we've gone from one extreme to the other, and it's likely oil is too cheap right now. Markets tend to do that, to go to extremes.

Even if OPEC fails to raise oil prices much, the net result will be a lessening of production in the Americas, which long term will inevitably assist oil prices to rise again, and probably to higher levels than we've ever seen.

Harry

But politically I've come to see the value in having "them" do it via supply cuts instead of us. Washington can advance the same transition with other resources while blaming the Saudis, others & deflecting political heat.

It's an ugly truth, but I think you are completely right. Politics doesn't happen in a rational world. In this case I think that the fallout from taxing the bejesus out of oil would cripple the new administration, preventing them from spending "political capital" on efficiency programs and the infrastructure that Obama has been talking about.

(Even though taxing the oil would provide a revenue stream for those activities...but there we go with logic again.)

Price fixing by any other term.

Price fixing by any other term.

When the price of a commodity drops, then production tends to drop. If the price of corn goes way down, then farmers plant something else. That's price fixing, too.

It's natural for the oil producers to be reluctant to sell their oil for $45/barrel when only a few months ago they were selling it for $147/barrel.

If you had an oil well, would you want to drain it @ $45/barrel, or hold out for $100/barrel?

And if you were in the business of looking for new oil, how motivated would you be right now?

Harry

When the price of a commodity drops, then production tends to drop. If the price of corn goes way down, then farmers plant something else. That's price fixing, too.

It's natural for the oil producers to be reluctant to sell their oil for $45/barrel when only a few months ago they were selling it for $147/barrel.

If you had an oil well, would you want to drain it @ $45/barrel, or hold out for $100/barrel?

And if you were in the business of looking for new oil, how motivated would you be right now?

Harry

Please don't equate the decisions of a single farmer (no market power) with the price fixing by an organization whose founding purpose and reason for existence is the exercise of coordinated market power. In fact, the farmer is always at the mercy of prices, and often ends up guessing wrong and being on the wrong end of each price cycle.

In the words of one of your fellow New Yorkers, "You cannot be serious..."

Well, history is repeating itsself one more time. They'll be pumping more oil in an effort to increase revenues. Bloomberg is reporting $40 a barrell and forecasting $30 a barrel.

As often happens in these cycles OPEC members don't trust each other to cut production. So they sneak in some additional output to try to increase funds.

Please don't equate the decisions of a single farmer (no market power) with the price fixing by an organization whose founding purpose and reason for existence is the exercise of coordinated market power.

It wasn't one farmer who increased production of corn when the price went up. Farmers everywhere were planting more acres of corn

As far as evil OPEC, notice how ineffective they've been at keeping the price of oil high?

So why are we throwing rocks at OPEC, when the price of oil is at 5-year lows? They obviously haven't done their price-fixing very well, have they?

Harry