OPEC, today, in their emergency meeting, decided to cut daily production by 1.5 million barrels beginning next month. The price of oil, since hitting a high in July, has dropped 55%, as of yesteday's closing. OPEC, in their statement today, stated the "The financial crisis is having a noticeable impact on the world economy dampening the demand for oil." Essentially, OPEC is more concerned with their being an oversupply of oil on the market. In particular, supply growth going forward. I seriously doubt OPEC nations are concerned about the short-term supply of their product.
I can definitely understand why OPEC would want to keep the price of their product high. Over the course of the last two years, OPEC nations have been benefiting from high oil prices. Earlier this week, the Iranian oil minister, Gholam Hossein Nozari, boasted that "The era of cheap oil is finished!" Both the Iranians and Venezuelans are in favor of gouging their consumers, specifically those of us who live in the good ole USA, to fill their coffers.
Why should we continue to deal with a cartel, especially a cartel that if it operated in the U.S. would be illegal, to procure fossil fuels? Especially from countries that do not really give two shakes about our country? As of right now, OPEC's move has backfired on them with oil dropping to $64.40 per barrel.
Obviously, OPEC's position is that they do not care about economic conditions. They do not seem to care that if they keep their prices high, they suffer like the rest of us. Instead of taking a longer-term view of their market, they decide they need their money now, which could very well backfire on them, if it encourages their customers to accelerate their research and development efforts for alternative sources of fuel. Regardless, nations, and in particular the U.S. needs to be devoting research money to developing alternative sources of fuel. It's a question of national security. We should not have our national security depend on a cartel of countries who, by the grace of providence, have been blessed with high supplies of a certain natural resource.
We need to be working on this situation now before it becomes too late, and before we become even more beholden to black gold than we already are.
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Friday, October 24, 2008
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