The world’s attention is focused today on the international financial crisis and the American elections. But another significant development is also taking place. Since the previous blog, the price of a barrel of oil has continued to drop precipitously, and as of this writing sank to under $70 per barrel, less than half of the $147 posting from July.
There are a handful of important ramifications:
- Will the extraordinary OPEC meeting next month in Vienna respond with major cuts in production to push the price back up? Some analysts suggest the market pressures could pull OPEC apart with petroleum “hawks” like Venezuela, Iran, Libya and Algeria pulling for cuts and the leading “dove,” Saudi Arabia, maintaining production levels.
- Iran and Venezuela require as much as $95 p/b to balance their budgets and continue their massive domestic and international subsidies. How will they respond to $50 - $60 p/b revenues?
- Will Russia, a major non-OPEC producer, join in cutting production to keep the price of oil high? Incredibly, today Russia’s central bank had to bail out Russia’s major oil and gas companies, including Gazprom, to the tune of $9 billion, suggesting major corruption in the companies. It appears that all that money that poured in over the last year was not used for industry exploration or development. Is anyone surprised?
- What will happen to the Russian-Iranian-Venezuelan axis in which Russia lent money to Venezuela to buy weapons, Russian oil giants promised to invest in Venezuela’s oil industry, and Iran agreed to invest hundreds of millions of dollars in Venezuelan projects?
- Will cheaper oil delay or cancel the development of alternative sources of energy?
- Will the inevitable price reduction at the gas pumps and heating fuel depots be soon enough and deep enough to lessen the recessionary pressures on the world economy?
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Today in History 17th October 1973 OPEC cuts production
The Arab-dominated Organization of Petroleum Exporting Countries (OPEC) agrees to cut oil exports by 5 percent until Israel withdraws from territories occupied in the Yom Kippur War. Failing to achieve that result, Saudi Arabia and several other nations cut oil production more dramatically. They imposed a total oil embargo against the United States and the Netherlands in retaliation for their military support of Israel. The embargo caused a major energy crisis in the United States and Europe, which included price gouging, gas shortages and rationing.OPEC cut production several more times in the 1970s, and by 1980 the price of crude oil was 10 times what it had been in 1973
http://thediamondguru.blogspot.com/2008/10/diamonds-dubai-style-asia.html
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