OPEC says market well supplied, declines to increase production

I got to hand it to the public relations folks at OPEC. They did a great job of keeping everyone off balance for the past 2 weeks. The media fell for the OPEC head fake so consistently it was embarrassing to watch. Thankfully, that’s over.

So let’s go through the scenario - OPEC meets at a time when :

• Oil prices have closed in on their all time record, rising over 50% this year alone, and up over 800% in 8 years.

• Inventories the world over have been in steep decline during the traditional “shoulder period”, the period between peak summer gasoline demand and peak winter heating demand, the time when inventories are normally building.

• In terms of “days of supply”, the only inventory number that really counts, the OECD country’s inventories are heading into the red zone.

• The world’s production of crude and condensate (“C & C”) has been flat to slightly declining for 2.5 years. Prices have doubled during this period. Spare me the lack of demand argument.

• Oil imports into the U.S. have declined for 2 years at roughly 1% per year. While oil imports have SURGED for China and India far more than the decline in U.S. imports.

• OPEC country's domestic consumption continues to rise, with projected 2008 year over year increase in demand second only to China at over 350,000 barrels per day.

• OPEC has increased production over 2 million barrels per day since 2000, but their exports have actually declined due to the increase in domestic consumption.

So, what does the gas station to the world do/say? That the world is “well supplied”.

Well, guys, that wasn’t the OECD country's point was it? No, there is no shortage of $90 per barrel oil. The problem is, the OECD countries were looking for some $50 - $60 per barrel oil, of which there seems to be an EXTREME shortage.

Note to the U.S. Department of Energy, the 2008 Presidential candidates, Congressman Bart Stupak, the iconic moron Richard Blumenthal (the Connecticut Attorney General who testified that the problem with oil prices stemmed from allowing all of the American Oil companies to merge! In other words, he proposed to solve the energy crisis by tough enforcement of the anti-trust laws, and in the process follow Eliot Spitzer’s example, and Rudy Giulliani, on how to get ahead in politics), etc…

When crude oil is $200 per barrel OPEC will again claim that the market is well supplied – and it will be! Just not with $100 per barrel oil.

So stop wasting the public’s time. OPEC is likely unable to increase production, and even if they could it would be for a very short time and not by a terribly meaningful amount. You know what you have to do, and yes the beginning stages of that discussion might well cost you your political career. Yet you ask young people to risk their lives and limbs in a war for oil while you refuse to risk only your jobs? Perhaps if politicians were shot for cowardice (the U.S. has done that to more than a few teenagers in its history, right?) we might get a better quality candidate.

The Great U.S. Energy Crisis has arrived.


Yours for a better (post fossil fuel) world,


Mentatt (at) yahoo (d0T) com