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9.24.2003
The Last Laugh The International Herald Tribune drops the bomb Thursday about OPEC's decision to cut production. It's a bit of mystery if the newspaper's analysis is correct and Bush's attempt to look over the cartel's shadow caused the Organization to cut product with the thought that the US would gleefully flood the world oil market when Iraq was ready to go. However, a certain guerilla war is making this impossible. The OPEC states feel that their market share is decling and in many of those countries, oil export price determines the books. As a result, the inevitably of supply and demand means that OPEC will hold out on lower production until it figures out what is going on in Iraq. The threat Saddam Hussein would set it's wells on fire threatened to crush the economy, but now that there is no longer a fear of that, the cartel is moving against the "neocons" of the Bush Administration, who hope that Iraq will allow us to break free of the grip of foreign oil. Alas, it may not be time to worry about lines at gas stations just yet, but there is an ominous problem to all this. Saudi Arabia current is the only state has enough oil resources to keep the market liquid. As the Saudis are part of OPEC, they largely determine just how liquid (no pun intended) the petroleum market it. The cut in production is due to hit just as winter energy costs rev up and more petroleum and refineries are dedicated to heating oil production. Although not the end of the world, the increased energy costs could really deal a severe blow to economic recovery until the weather warms in '04. It doesn't help that President Bush is seen as cozy, already, to the Texas energy firms like Enron and the Saudi royal family. In fact, unless Iraq is more or less ready to ramp up oil production to meet OPEC head on, the winter is going to be rather tough from an energy point of view. So much so that it would appear at least on Middle East geopolitics, OPEC gets the last laugh. |
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