Payback's a b.... well, you know what I mean.
Posted on 07/21/2002 4:08:04 AM PDT by enrg
The Organisation of Petroleum Exporting Countries said on Friday it was prepared for a price war unless Russia took steps to curb its rapidly growing production.
A senior Opec official said the cartel, which supplies about a third of the world's oil, was becoming increasingly frustrated by Russia's improving relationship with the US and its growing share of the world market.
"The Russians are playing a dirty political game with Opec and it is becoming very hard to trust them. If they are keen on having a price war, so be it. It is time we abandoned the soft approach and became more aggressive," said the official.
The comments mark an escalation in the tension that has been building between Opec and Moscow over the past six months.
Russia, in common with Mexico and Norway, other large non-Opec members, agreed to trim exports in the first half of this year in an effort to maintain oil prices in Opec's $22-$28 per barrel target range.
But many observers believe Russian producers kept volumes high through exports of refined products and exports of oil to neighbouring countries of the Commonwealth of Independent States, which were not covered by the loose agreement with Opec.
The Opec official's comments followed remarks by Rilwanu Lukman, Opec president, that the organisation had "the reserves and the capacity" to respond to a price war with Russia.
Opec ministers are due to meet on September 18 to decide whether to change the current production quotas. The official said an increase in output was backed by most ministers, with the intention of driving crude oil prices down by $3 or $4 a barrel.
The US has been encouraging Russia to raise its oil production and exports as relations between the two countries have improved since the terrorist attacks on the US last September. It sees Russian oil as a means of reducing Opec's ability to fix prices and as a hedge against instablity in the Middle East.
According to Renaissance Capital, a Moscow investment bank, Russian crude oil production rose 8.6 per cent year-on-year in the first half of 2002, and total crude oil exports rose 3.4 per cent.
In February this year Russia briefly overtook Saudi Arabia, the leading member of Opec, as the world's biggest oil producer.
Leo Drollas, oil analyst at the Centre for Global Energy Studies, said any move by Opec to drive down the crude price would be "nonsensical".
"The only way Opec could win the market share issue would be by dropping prices to $12-$15 a barrel and that would hurt Opec countries more than Russia," he said.
Brent crude, which has been supported by security concerns in the Middle East and Iraq, fell 31 cents to $25.98.
The loss of revenues that the Saudis would encounter by lowering prices would be partially offset by increased volume.
The first to be hurt by falling prices are US producers. At $19/barrel, drilling in the US stops. At $14/barrel, the valves on existing units are closed. Cheap oil increases our reliance on imported oil. Not to mention what is does to production of natural gas. The US is already in a drilling slump. There are about 725 active rigs in the US. Last year at this time there were 1250.
When prices fall, govt increases the excise tax. Remember '98?
For stability and benefit of all producers, the price of crude needs to be $25 +/- $2/barrel.
Now, if only we would consider the oil assets of "Seward's Folly" which we refuse to tap "for our benefit".
Not utilizing this asset, establishes Alaska as "The 2002 Folly".
Sac
Spectacular, but unnecessary. Once the Arab states implode, they will go to pieces like a cheap hand grenade.
Ashland, Missouri (where the cheapest unleaded goes $1.39/gal)
Ashland, Missouri
Second, gas prices that low would devastate the American Oil industry. If you ruin that, then you will be left at the mercy of the countries we import from next time the price starts to go up. Anyone want $4.00 a gallon gas??? Talk about shut the economy down.
I don't really see a bad side.
Here in the People's Soviet of Washington (on the Left Coast), that's not an issue of belief -- it's guaranteed!
The ideal scenario would be to drop prices to the point where the Saudis have just enough revenue to support their internal welfare state, but not enough to finance exporting radical Islam to the world
And the more the Saudis produce, the sooner they come to the point where they've exhausted their oil, and go back to being camel jockies
OK, so put a $5/barrel tariff on imported oil to replace the gasoline tax. OPEC oil would then have to sell for $15 in order to be competitive with domestic $20 oil.
Better would be a strong program to increase nuke plant contruction, with a goal to have 60% of US power production be nuke by 2020, accompanied by raising the tariff on imported oil to $15/barrel
Let's look at oil production and geo-politics. We know that the Saudis have covertly financed this 'Islamic' militarism, precisely where it hurts competitive oil producers the most: In lands they need to build and operate (vulnerable) pipelines to the West: Chechnaya, Afghanistan, Armenia. So it's not just a matter of safety, it's again a case of a 'war' being fought for trade.
And before we kid ourselves, remember that we now E-X-P-O-R-T Alaskan crude to Asian markets! So why would we 'need' to drill for more, as opposed to simply refining what we already produce?
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