Defiant OPEC unmoved by oil price pain ("There is no shortage of oil") : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Defiant OPEC Unmoved by Oil Price Pain 6.25 a.m. ET (1125 GMT) January 25, 2000

LONDON  A reinvigorated OPEC seems in no mood to listen to complaints about high prices as it luxuriates in a revived flow of petrodollars.

A steep oil price rise is putting fresh pressure on the exporter cartel to release its grip on the taps and stop markets soaring out of control, analysts say.

But oil ministers enjoying the highest prices since the 1991 Gulf War appear determined that nothing shall spoil the party.

"What (price) rise? There is no rise. It is normal, very normal,'' Kuwait oil Minister Sheikh Saud Nasser al-Sabah said.

OPEC ally Mexico says the latest spike is a blip. Venezuelan Oil Minister Ali Rodriguez sees only a "short term phenomenon.''

The Organization of the Petroleum Exporting Countries has engineered the highest prices in nine years by curbing supply, swelling the coffers of member states after a damaging glut and price slump in 1998.

Key producers including OPEC kingpin Saudi Arabia are now suggesting year-long curbs on output should be extended beyond their end of March expiry to shore up prices.

But the prospect of ever tightening supply is raising concern in Washington about renewed inflation in a presidential election year if prices stay too high too long.


"Does OPEC have a death wish after all?'' said London's Center for Global Energy Studies (CGES).

"It seems key OPEC decision makers have forgotten the havoc wreaked on oil demand in the 70s and early 80s by gratuitously high oil prices.''

U.S. Energy Secretary Bill Richardson announced on Monday he would hold talks next week with the oil ministers of Mexico and Venezuela and next month with their counterpart in Saudi Arabia.

He has recently made plain his concern at the highest prices since the 1991 Gulf War and at global oil stockpiles sinking toward record lows.

OPEC can ill afford to ignore the United States, which wields enormous commercial influence as the world's largest energy market and is a hungry customer for Saudi, Venezuelan and Mexico crude.

It also enjoys huge political clout as Saudi Arabia's dominant strategic ally.

Analysts note Richardson has been urged by some members of Congress to tap the nation's oil emergency stockpile to push down prices.

But OPEC sources say the group is not about to buckle to pressure. They say the latest price spike of $3 a barrel in the past two weeks has more to do with a temporary blast of unusually cold weather in the northeastern United States than with global supply and demand.

Prices will cool off as temperatures return to normal, they say, pointing to a $1.50 fall in the price of benchmark Brent since a fresh nine-year peak of $27.11 on Friday.

"There is no shortage of oil,'' a Gulf Arab source said, adding Richardson's gambit appears more to do with U.S. domestic politics than with the realities of the global oil market.

"We have to stop this business of trying to always interfere in things when the situation changes,'' the source said of Richardson's proposed visit to Saudi Arabia next month.

"I understand traders doing this, but I don't understand officials doing this.''


But analysts warn OPEC against overplaying its hand. While the cartel may look askance at political pressure, it cannot ignore the threat to its market share posted by high prices.

A lengthy spell of firmer prices will encourage investment by producers outside OPEC that will eventually bring on new supply that could threaten a new glut and depress prices.

"The real deciding factor will be that they don't want to see their share of the world market shrink longer term,'' said Tim Evans, senior commodity analyst at Pegasus Econometrics.

"The longer OPEC keeps constraints in place, the harder the landing that they are going to have later on,'' said analyst Geoff Pyne at Standard Bank in London.

One result could be an increase in price volatility and more speculation -- the exact opposite of OPEC's stated goals -- as OPEC tries to micro-manage a famously skittish market, said Petroleum Finance Co, a Washington DC-based consulting firm.

At stake is global economic stability as well as OPEC's much-vaunted claim to be a responsible supplier of a strategic commodity that is the lifeblood of industrialized society.

Gordon Gray, director of oil and gas research at Salomon Smith Barney in London, told Reuters Television that high prices were not sustainable in the long term.

But he added: "The key factor is the inventory situation globally, which is extremely tight. It is set to get even

-- Homer Beanfang (, January 25, 2000


... and not a word, in any of this discussion, about Y2K. I wonder if someone could call up Senators Bennett and Dodd, and get them to re- issue their Senate 100-day report. Dodd, as you may have heard, is already calling on the Federal government to "do something" about these terrible oil prices. What a shock! What a surprise! How could this have happened?!?

-- Ed Yourdon (, January 25, 2000.

I betcha we could make nice-nice with saddam, let him eat the sheiks for lunch, and cut ourselves a hell of a better deal with *him* when all is said and done.

Then we could tell *them* that we're "umoved by their pain" when they come a-whinin' our way.

Somethin' for them to think about when they're doing whatever the hell it is they do when they're not being unmoved by our pain, eh?

-- Sluggo (sluggo@your.head), January 25, 2000.

There is a very simple solution to this OPEC problem. Simply...All oil user nations should create a similar pact like OPEC and put a surcharge on all products shipped to OPEC Nations. See how they like it!

-- smitty (, January 25, 2000.

...But oil ministers enjoying the highest prices since the 1991 Gulf War appear determined that nothing shall spoil the party.

"What (price) rise? There is no rise. It is normal, very normal," Kuwait oil Minister Sheikh Saud Nasser al-Sabah said...

Sort of makes you wonder about the wisdom of pulling Kuwait's chestnuts out of the fire for them in 1991, doesn't it?

-- I'm Here, I'm There (I'm Everywhere@so.beware), January 25, 2000.

just a thought on this situation. I'm hearing that in Ok.,Ks, Tx, and other parts of the Nation oil wells that have been out of use for some time due to getting drivin out of the market are now starting up again. Now I don't like the prices of gas and in my case propane for heat but personally I'd rather see the money stay here than in some Ahab the Arab's hands. We have a better chance of seeing the money again if it stays here than over there.

Best wishes Best luck Poacher.

-- poacher (notnow@not, January 25, 2000.

I am not one for conspiracy theories, but I just hatched one and invite everyone on this forum to either shoot down this theory or polish it.

Key phrases and words from above article are: Defiant OPEC Unmoved by Oil Price Pain and ---- raising concern in Washington about renewed inflation in a presidential election year if prices stay too high too long.

Only liberals will sit and whine about pain, expect someone else to do something about it while blaming someone else for what ever problems there might be. On the other hand conservatives are more apt to just go ahead and find a solution to the problem take responsibility for what ever happens.

Now we have an election year. And we have a President that is in power primarily because of the publics perception of the economy being better than perfect. Yet in reality it is a manipulated bubble that will pop sooner or later.

Really, if I were a conservative seeking the highest office, with lots of support and or power already accumulated as evidenced by campaign contributions and polling data, I would do what ever is possible to make the inevitable happen now during the election year instead of waiting for it to happen on its own after I am elected. The benefits would be enormous.

y2k or no y2k, it is irrelevant, the current oil problem is being blamed on OPEC by the liberal media. Who cares what the facts are, just go along with blaming OPEC for the problems, this is what the public wants to believe. OPEC does not care who gets blamed as the prices rise and profits continue to flow.

Could it be that there is a conspiracy between conservatives seeking power and OPEC and others to use oil to pop the bubble thereby ensuring who wins the next election?

-- Just Wonderin (conspiracy@republican.opec), January 25, 2000.

Just Wonderin,

Valid points. Wouldn't surprise me in the least.


-- Diane J. Squire (, January 25, 2000.


As a somewhat jingoistic Texan, I'd love to believe what you said. One only has to look at oil history to know that domestic production couldn't compete with the reduced prices of the OPEC cartel. We CAN compete now with the prices offered by OPEC, but I'd like to see some proof that we're actually engaged in this process. Do you have any?

-- Anita (, January 25, 2000.

Just wonderin----

Don't forget Bush Sr. just made a trip to Kuwait.

-- Johnny (, January 25, 2000.

I'm Here,

You have a husband was one of those people pulling out those chestnuts. But it has made for an interesting photo album. =)

-- Dee (, January 25, 2000.

Just Wonderin,

Well, there was the 'October Surprise' -- rememeber the Iranian hostage crisis?

One line of thought: (reference found in a Gary North article today) is a really graphic depiction of (oil) refining and tranportation problems over the last 12 months. But they couldn't have been y2k remediation problems, could they?

Second line of thought: The current administration has made an art of 'feeling our pain' and then 'solving it' without really doing anything but getting more 'campaign contributions'.

Third line of thought: Why do you suppose Yugoslavia happened? Have the hundreds of thousands of graves been found? tens of thousands? thousand -- maybe. Could it have been to secure a politically-reliable pipeline route? Why do you suppose Putin is not about to ceede control over the Balkan countries (and reserves)? Could it be time for the mastroika to wrap up?

Fourth line of thought: What key asset is alleged to be found in major quantity in the Singapore Straights? And China's interest in the Philipine area is purely political?

Oh, BTW, check out precious metals price trends (like platinum) -- and especially the stuff that comes from only one major supplier -- Russia.

As for the various commentators and 'experts' and analysts in the original post, could they say much else? Without scaring the bejesus out of their clients? Without being decidedly non-PC?

Finally, could it be that we're seeing pieces-parts of all of the above dropping into more obvious place?

Homer, you sure do turn up some gems!

-- Redeye in Ohio (, January 25, 2000.


Note that the last sentence is incomplete. It is incomplete on the link to foxmarketwire also.

It appears to say: ": "The key factor is the inventory situation globally, which is extremely tight. It is set to get even


-- Bill P (, January 25, 2000.

The higher the oil prices rise, the more attractive alternative sources become. Let them try to keep it up. We conserved in the 70's, we can do it again.

-- haha (, January 25, 2000.

This is why the U.S. should quit meddling in other's affairs. We back Iraq, then Iran, then Kuwait - everyone except Russia, then send Russia lots of money and food, then help Kosovo and try to "encourage"Russia not to be "too" brutal in Chechnya. We have pretty much made enemies of everyone either directly or indirectly - Thus Kuwait's response to our little problem. "There is no problem . . ." Yea, and there have been and will be no Y2k probs either . . .

-- robert bright (, January 25, 2000.

"There is no shortage of oil,'' a Gulf Arab source said, adding Richardson's gambit appears more to do with U.S. domestic politics than with the realities of the global oil market."

Well, we will soon see if this statement is indeed true. If prices don't fall back to pre-shortage price levels, then you will have your answer...just like we did when prices didn't fall back to pre-embargo costs back in the mid 70's. Someone wants us to pay more for our fuel, and is willing to lie, cheat and scam to do so.

-- OR (, January 25, 2000.

I think a US diplomat showing Kuwait a map of Iraq with Kuwait as a province should change the discussion to a more cooperative one.


-- cgbg jr (, January 25, 2000.

"They went thataway!"

Point to anything but the truth when the issue of control is on the line, not to mention legal liability.

In the great Y2K remediation debate we have witnessed the most successful execution of the statement above ever perpetrated. While it was fortuitously concerted, it was not Koskinen,or the CEO's, or the managers, or the programmers at the root. It was Legal Counsel.

Many had concluded this some time ago, that the true state of affairs would wind up being attributed to other factors because of legal liability or a perception that things were out of control. Saudi Arabia is not about to infer that they don't have complete control of their capacity to produce oil. Nor will any entity, corporate or government. Now in the confusion, when the cold fact of a minimum 5% shortfall in world production becomes evident, countless reasons will be conjured for the predicament.

What do you think the odds are that among those officially recognized will be failed Y2K remediation?

-- roy scruggs (, January 25, 2000.

I still think oil is self moderating at $40/bl. We have to get used to this more painfull level.

I see this as a long needed wake up call that will make alternate energy sources economically viable (fuel cells) while addressing global warming.

I also agree with above post, would like to see re-open of US wells and switch to more reliable suppliers overseas. Screw the mid-east, we have been down that road too many times.

-- Surrounded (, January 25, 2000.

So they're sick of giving away THEIR resources at rock bottom prices.....can you blame 'em........

Get used to it...$30.00 a barrel is bloody cheap for oil. Hell, how much a barrel do you charge them for useless crap like Coca-Cola? Figure out what a barrel of purified water sells for when you pay a buck for a small bottle at 7-Eleven.

Total hypocrisy.....that's what I see here. So many of you boneheads say nothing about the fact that Micheal Jordan makes more money by HIMSELF than all the overseas people that actually do some work in making the sneakers......utter hypocrisy. You whine when you have to pay a dollar for a pound of bananas but look the other way when the poor foreigner that picks them off the trees works the whole damn day to earn a dollar!

The oil industry has been decimated by ridiculously low prices for you're getting your comeuppance! You that worship the free market as God, stop changing your religion the moment it becomes uncomfortable.......

If you don't want to pay $30 a barrel then don't buy the stuff!! Use something else......but please, o please, quit your bitching.

-- Craig (, January 25, 2000.

Craig, I hate to say this, but you're an idiot.

Lives won't be lost based on the price or availability of Coca Cola or sneakers.

If oil keeps on going up in price, and the supply keeps dwindling, we'll be looking down the "barrel" of something every bit as bad as the worst of the Y2K predictions.

-- Sluggo (sluggo@your.head), January 25, 2000.

Craig, turn me on to how to convert my 360 CID Dodge Magnum into natural-gas-burning. I'm serious. Here in Texas, we had a NG GM plant - not sure if it's still in operation - but I'd surely love to be 'off OPEC'.

Know anything?

Also need specs on a Ford 289.

-- lisa (, January 25, 2000.

At the Vo-Tech in Lawton, OK they have (or at least had previously) auto mechanic classes to teach how to convert vehicles from gasoline to compressed natural gas. There's at least one gas station that I'm aware of that sells CNG(compressed nat. gas). The state of Okla used to give a tax credit(I think it was a credit and not a deduction) for installation of alternative sources of fuel for vehicles...not sure it still exists but I did check it out a few years ago. I saw the CNG "tank" at an auto show previously. It is just a little retangle box "thingy" that goes into the trunk of the vehicle. ( Unlike propane, which cannot be put into a closed area.)

-- jeanne (, January 25, 2000.

Jeanne, thanks.

Sounds like nothing but good could come from converting to NG.

Well, except for political de-stabilization of the Middle East, which we (US) seem to precipitate willfully.

-- lisa (, January 25, 2000.

To Craig, Do you know how many billions of our tax dollars go to these OPEC countries each year for their defense and foreign aid? I think when oil goes above 30 dollars we should cut off the flow of money to OPEC.Some of our young men and women gave their lives to keep the peace in some of these same countries that are sticking it to us now.Let those towel headed camel jockeys take their profits and provide their own defense.


-- kenny isbell (ISBELL@IAMERICA.NET), January 26, 2000.

I agree with you Kenny......cut off the aid to them. The whole thing is artificial at the them market price and let them pay their own expenses.....sounds reasonable to me.

And to whoever made the comment about coke not be as crucial as what?...........It doesn't change the fact that it is THEIR oil. If we as western nations built our societies on something that we didn't have enough of then it is our folly, not theirs.

Let me explain......we have more oil in North Eastern Alberta than there is in all of the middle's called the Athabasca Tar Sands. The problem is, it used to be very expensive to get the oil out of the ground. Now the fact it, Canada being the USA's ally, the USA could have agreed to pay a higher price per barrel of oil, say $20.00 to guarantee development of these oil fields earlier and guarantee a supply of oil from a friendly ally as opposed to where they are getting a lot of it from now.

Oil, after all, is a matter of national security. The bottom line is the God of the free market said "why pay $20 to get oil from the Tar Sands when we can pay $15 to get it from Saudi". Fine, the decision was made and development of the world's largest oil reserves was delayed or limited at best.

NOw the price is closer to $30 per barrel and could go higher. If oil was so crucial to our western societies then the government should have taken action to secure domestic supplies decades ago. But the 'free market' reigned. Okay, GREAT, you want the free market and now you have it......

Or better said as "Live by the sword, die by the sword".

-- Craig (, January 26, 2000.

One more thing on reading your post closer Kenny.......

Calling them "towel headed camel jockeys" is a bloody rude and racist thing to do. It is attitudes like that that ensure we will continue to have wars for the forseeable future.

-- Craig (, January 26, 2000.


Free market? Can you spell C-A-R-T-E-L?

-- Homer Beanfang (, January 26, 2000.

Craig, you're a barrel of laughs.

What makes you think that Canada is the US's ally? With damned few exceptions, you're nothing but a nation of parasites addicted to the government teat, who have gratefully traded away your freedom for a cradle to grave handout of whatever the state feels like allowing you to have.

Take your oil sand and stick it where the polar bear don't shit.

But thanks for slipping up and letting on to your _real_ agenda -- to stick it to the US with inflated price for your tar sand.

-- Sluggo (sluggo@your.head), January 26, 2000.

To Craig, Sorry if my comment about camel jockey offended you. I did't mean it to offend anyone, just as I'm sure your comment about everyone who disagrees with you is a bone head. I happen to be a farmer and I would hate to think what would happen if the farmers got together and said, ok we think commodity prices are too low lets stop shipping grain and meat to everyone untill they are willing to pay our price. Can you imagine bread at $10.00 per loaf? Think about it.


-- kenny (ISBELL@IAMERICA.NET), January 26, 2000.

Homer, Great post as always, although I did see you even got a lil wound up. Sluggo, I'm LMBO and Kenny, you are sooo right....bread 10.00 per loaf? Geezeee,,,,,sounds alot like a days wages for a loaf of bread to wit, those days are coming.

-- consumer (, January 26, 2000.

Somthing else to consider. As far as the poor people who pick the bananas and make the shoes for a dollar a day, the oil money goes to a few of the wealthy while the rest live in near poverty. The oil shieks drive mercedes while the rest ride camels.

-- kenny (ISBELL@IAMERICA.NET), January 26, 2000.

Craig, Enjoyed and agree with your well written posts. Let the free market decide on the price of oil. Really free, both ways. Let the priorities change. People might finally understand that oil is a more important commodity than Coca Cola. And we both know that the money the U.S. government spends to "protect" the middle east is used to create business for McDonald Douglas, Boeing, etc. Which is, of course, corporate socialism. Let that game become a free market also. It amazes me that we Americans think the whole world should serve us at the lowest possible prices. We are so spoiled. Thanks again, Glen

-- Gen Curtis (, January 29, 2000.

Guys, guys... "There is no shortage of oil" ... Sure enough, there is no shortage of oil...DOWNHOLE. That's subsurface, but the minute you want to produce it, either Y2K or not Y2K, something happens, things break down, pipes blow up, etc.

So, there is no shortage of oil. But we do have a shortage of production capacity, refineries and distillates included, so price increases. Furthermore, we all talk dollars, deflated dollars, eurodollars, future dollars... Arabs only care about how many ounces of gold a barrel buys.

So I insist, $30 dollar oil means we are facing something as important as either (1) the Iran hostages crisis or (2) the Iran-Irak war or (3) Desert Storm. Nothing less.

Take care.

-- George (, January 29, 2000.

Calling them "towel headed camel jockeys" is a bloody rude and racist thing to do. It is attitudes like that that ensure we will continue to have wars for the forseeable future.

-- Craig (, January 26, 2000.

Quite right Craig, the correct PC term when I was in Saudi was "rag- heads" for the guys and "guinness bottles" for the women, what little you could see of them. Lighten up Craig, these are terms of endearment. Your average Arab is the most generous, polite, friendly person you could wish to meet. Any idea what they call the white man, the yank, the septic?

-- Andy (, January 29, 2000.

C'mon Andy, spit it out! Just what do they call us?

Take care

-- George (, January 29, 2000.

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