NationStates Jolt Archive

Traditional OPEC policy has been to have a large market share in world oil production. In recent decades, with the developement of fields in Russia, the North Sea, Alaska, and other places, OPEC has lost some of its market share, and wants to gain it back. Now, OPEC has reversed course. If it weren't for the current situation, I'd think that OPEC has completely lost their minds.
http://www.kotv.com/main/home/stories.asp?whichpage=1&id=63951

I *hate* OPEC, or at least the fact we have to be dependant upon them.

I *hate* OPEC, or at least the fact we have to be dependant upon them.
Regardless of that, you must acknowledge that OPEC is worried about something. My guess is how terrorists are trying to hijack the oil industry in Iraq and Saudi Arabia, and that's probably what's behind this. But I'd think that high oil prices would be great for their economy, and I feel that it is premature to be asking others to produce more.

@Purly Euclid,

what you say is only partly true. High oil prices may be damaging the world economy and therefore the economic growth and the DEMAND FOR OIL. Secondly: if the oil price would remain that high it would make economicly more sense to exploit resources in Canada and Siberia and use the oil slick to gather oil (which is too expansive if the price is 10 Dollar a barrel but not if it is 30-40 Dollar a barrel). That would also lead to a lower market share of the OPEC. The OPEC would therefore even lose more of its relevance.
Therefore it is in the interests of OPEC countries not to allow the prices to rise that high.

I think you nailed it, Kybernetia. If oil prices stay above $40 a barrel, then it becomes economically feasible to drill in the US again. Below that point, it's not really worth it.

There's also the issue of higher oil prices driving up the prices of other goods--a large part of the high inflation in the 70s was due to the fact that in today's dollars, oil was about $88 a barrel. High oil prices mean higher cost to get goods to market means higher costs passed on to consumers. The airline industry is getting whacked right now because of fuel costs--Delta warned today that it could be bankrupt in 6 months if the situation doesn't change.

But none of that addresses the real problem--that oil is getting scarcer and demand is growing and that means higher prices long term. Oil prices may dip for now, and there may be a bit of relief at the gas pump, but I'm betting that $2.00+ a gallon in the US is going to be the standard within the next year, and it will hit $3.00 a gallon in some places.

@Purly Euclid,

what you say is only partly true. High oil prices may be damaging the world economy and therefore the economic growth and the DEMAND FOR OIL. Secondly: if the oil price would remain that high it would make economicly more sense to exploit resources in Canada and Siberia and use the oil slick to gather oil (which is too expansive if the price is 10 Dollar a barrel but not if it is 30-40 Dollar a barrel). That would also lead to a lower market share of the OPEC. The OPEC would therefore even lose more of its relevance.
Therefore it is in the interests of OPEC countries not to allow the prices to rise that high.
OPEC has artificially inflated oil prices for years. In fact, I've heard that if OPEC didn't price their own oil, then oil would hover around $20/barrel. Besides, last year, as prices started their ascent, OPEC nations benefitted because of more capital flowing inward.
I also think that unless prices rise above $55/barrel, demand wouldn't be hurt as much. Gas is somewhat a factor in people's decision making right now, but overall, the summer driving season will see a record number of travelers, China is growing at an uncontrolled rate, and oil will still be needed.
However, my worry is that OPEC is worried about prices getting very high, perhaps past $55/barrel. They're probably worried that these terrorist attacks in Saudi Arabia and Iraq are gonna hurt the oil industry, and I agree that they might. I was just saying that if the terrorism threat isn't as large as it seems, OPEC runs the risk of loosing market share.

I *hate* OPEC, or at least the fact we have to be dependant upon them.

Yeah, how did your oil end up under their soil anyhow?

@Purly Euclid,

what you say is only partly true. High oil prices may be damaging the world economy and therefore the economic growth and the DEMAND FOR OIL. Secondly: if the oil price would remain that high it would make economicly more sense to exploit resources in Canada and Siberia and use the oil slick to gather oil (which is too expansive if the price is 10 Dollar a barrel but not if it is 30-40 Dollar a barrel). That would also lead to a lower market share of the OPEC. The OPEC would therefore even lose more of its relevance.
Therefore it is in the interests of OPEC countries not to allow the prices to rise that high.
OPEC has artificially inflated oil prices for years. In fact, I've heard that if OPEC didn't price their own oil, then oil would hover around $20/barrel. Besides, last year, as prices started their ascent, OPEC nations benefitted because of more capital flowing inward.
I also think that unless prices rise above $55/barrel, demand wouldn't be hurt as much. Gas is somewhat a factor in people's decision making right now, but overall, the summer driving season will see a record number of travelers, China is growing at an uncontrolled rate, and oil will still be needed.
However, my worry is that OPEC is worried about prices getting very high, perhaps past $55/barrel. They're probably worried that these terrorist attacks in Saudi Arabia and Iraq are gonna hurt the oil industry, and I agree that they might. I was just saying that if the terrorism threat isn't as large as it seems, OPEC runs the risk of loosing market share.

Artificially inflate? That can be applied to just about all American Industrys. Supply and demand.....

OPEC does not want the price per barrel to get too high as it will encourage nations to see other energy means. They really don't want to see oil reduced to a lubricant! ;)

@Purly Euclid,

what you say is only partly true. High oil prices may be damaging the world economy and therefore the economic growth and the DEMAND FOR OIL. Secondly: if the oil price would remain that high it would make economicly more sense to exploit resources in Canada and Siberia and use the oil slick to gather oil (which is too expansive if the price is 10 Dollar a barrel but not if it is 30-40 Dollar a barrel). That would also lead to a lower market share of the OPEC. The OPEC would therefore even lose more of its relevance.
Therefore it is in the interests of OPEC countries not to allow the prices to rise that high.
OPEC has artificially inflated oil prices for years. In fact, I've heard that if OPEC didn't price their own oil, then oil would hover around $20/barrel. Besides, last year, as prices started their ascent, OPEC nations benefitted because of more capital flowing inward.
I also think that unless prices rise above $55/barrel, demand wouldn't be hurt as much. Gas is somewhat a factor in people's decision making right now, but overall, the summer driving season will see a record number of travelers, China is growing at an uncontrolled rate, and oil will still be needed.
However, my worry is that OPEC is worried about prices getting very high, perhaps past $55/barrel. They're probably worried that these terrorist attacks in Saudi Arabia and Iraq are gonna hurt the oil industry, and I agree that they might. I was just saying that if the terrorism threat isn't as large as it seems, OPEC runs the risk of loosing market share.

Artificially inflate? That can be applied to just about all American Industrys. Supply and demand.....

OPEC does not want the price per barrel to get too high as it will encourage nations to see other energy means. They really don't want to see oil reduced to a lubricant! ;)
Most industries have a profit margin, but OPEC's profit margin is far larger than many products. They inflate prices like a trust. In fact, some lawyers in the US have brought anti-trust lawsuits against OPEC, but they've all been dismissed, based on the grounds that OPEC is a governmental organization.
Anyhow, in trusts, no competition means that prices can go to whatever the hell these businesses want to sell them at. OPEC hasn't a monopoly on production, but the other big producers, like Russia, Mexico, and the US, don't nearly have as big of reserves as OPEC does. The other countries will inevitably run out in a decade or two, but if it really wanted to, OPEC could probably increase production dramatically (though it'd cost billions of dollars to build additional infrastructure).
As for the part about demand, I sort of agree with that. The thread title was simply to draw people in, and I think they run the risk of losing market share in the near-term. However, this message from OPEC sounds to me like an extreme act of desparation. They probably expect that with further terrorist attacks, the oil industry will be hurt enough to raise prices to $4/gallon. And if the terrorists attack a Saudi oil field or refinery, prices would skyrocket.
There are other problems from their non Middle Eastern members. Indonesia is on the cusp of becoming a net oil importer. Venezuela is going through a time of instability. And general strikes are threatening production in Nigeria. This may build to a crecendo in prices, but I'm very surprised that they're this worried.

bump

I bet they're sniffing gasoline...

/I got nuthin'

bump

Bumpity bump

Bumpity bump

Purely to spare pearly euclid from consistently bumping this thread, i will add my 3 cents to the subject of oil pricing.

High oil prices are the natural market resposne to the off shoring of production to Asia and in particular China. All those cheap electronics and textiles use up energy in the production whereever that production takes place. If the consumer keeps buying crappy imports from Wal Mart and valueing quantity over quality then prices will continue to rise.

Purely to spare pearly euclid from consistently bumping this thread, i will add my 3 cents to the subject of oil pricing.

High oil prices are the natural market resposne to the off shoring of production to Asia and in particular China. All those cheap electronics and textiles use up energy in the production whereever that production takes place. If the consumer keeps buying crappy imports from Wal Mart and valueing quantity over quality then prices will continue to rise.

Purely to spare pearly euclid from consistently bumping this thread, i will add my 3 cents to the subject of oil pricing.

High oil prices are the natural market resposne to the off shoring of production to Asia and in particular China. All those cheap electronics and textiles use up energy in the production whereever that production takes place. If the consumer keeps buying crappy imports from Wal Mart and valueing quantity over quality then prices will continue to rise.
My excessive bumping was actually a double post. Damn server.
Anyhow, I agree with you. In 2002, China was a net exporter of oil. In 2003, not only was it a net importer, it surpassed Japan as the second biggest importer of oil. At this rate, I fear that oil consumption in China will continue to accelarate, despite how high oil prices go.

I like discussing about this issue too much to let it die, so bump.
However, I guess discussing about energy isn't nearly as fun as Bush bashing.