Falklands : OPEC Could Price Itself Out of the Market
Submitted by Falkland Islands News Network (Juanita Brock) 11.01.2009 (Article Archived on 25.01.2009)
Rumours are ripe that OPEC is beginning to talk about cutting production even though a reduction was agreed to in December. Then severe cuts were greater than declining demand and OPEC apparently wanted this move to increase prices.
OPEC COULD PRICE ITSELF OUT OF THE MARKET
An Editorial by J. Brock (FINN)
Rumours are ripe that OPEC is beginning to talk about cutting production even though a reduction was agreed to in December. Then severe cuts were greater than declining demand and OPEC apparently wanted this move to increase prices.
And, what’s more, OPEC’s largest producer, Saudi Arabia, announced last weekend that it would slash crude output by about 300,000 barrels per day below the December agreement.
It is known that oil ministers want to increase prices by cutting supply but during the credit crunch I think they ought to be more practical.
FINN agrees to production cuts because no one will be buying hydrocarbons products if the price is too high. Storing these products – and even the crude itself – costs money and it is best just to leave it in the ground until demand picks up.
You usually can tell this by the fact that people take advantage of affordable prices.
Already major vehicle manufacturers are building models that run on batteries and they are quite popular with consumers that still have money to buy them. If crude prices increase, these vehicles will increase in popularity.
During these challenging financial times people are cutting back and/or seeking alternatives in order to bring their expenditure down. Raising crude prices and those of resulting products will not achieve the sought after price rally but will only slow demand even further.
On Tuesday good news from the Federal Reserve about a proposed stimulus package has sent crude prices higher but that stimulus is government and not grass roots driven. The stimulus will help but as soon as it is implemented there are people who will raise prices to get a share of them.
Meanwhile, there is a growing number of people who are being made redundant and companies that are going bankrupt. People who have cut back consumption have not saved money due to increasing product prices. They will have to cut more consumption to meet stringent budgets. Rising prices in this climate will not realise increased demand.
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