What goes up must come down… That’s the way the old adage goes, but the world’s oil-producing nations don’t see it that way. OPEC and several other independent producers, such as Russia and Azerbaijan, convened yesterday to try and arrest what they see as quite possibly the worst thing ever: a return to sane oil prices for the rest of the world.
For the US, this drop in prices could not come at a better time. Just this break alone is the equivalent of hundreds of billions of dollars in cash injections into the economy. So, take heed, loyal worker: the breaks roll both ways, the blood can be staunched, etc.
And certainly, this Christmas, the last thing Americans needed was $150+ per barrel crude prices.
But this loosening of the petroleum noose around our necks has proven difficult to swallow for the countries which butter their bread with our energy dollars.
Indeed, because of developments both political and technological, many of the industry’s most shrewd recognize that the summer of ’08 just might have been the watershed moment, a high tide in world petroleum demand.
With the price of PV solar set to drop by 20% over the next year because of new techniques, and a president in office who understands more than just DRILL BABY DRILL, perhaps the sultans and sheiks who have bankrolled their own extravagances on our oil addiction are coming to realize that the world energy detox just might affect their bottom line, after all.
Russia, Venezuela and several other countries have already warned that many vast, over-arching social programs will have to be scaled back. But the oil producers aren’t going down without a fight. Indeed, they resolved at this most recent meeting to cut production by another 2.2 million barrels per day, bringing the total cuts to rougly 4.2 million barrels per day over the past four months.
Still, with world demand slumping, this tightening of the noose has failed to produce the desired effect. Panic has not ensued and the price of sweet crude continued to fall today to a four year low of $40.06 per barrel.
“All we can do now is cut, and pray,” said one OPEC delegate. (via the WSJ)
Well, keep praying, I say. Because you can’t run an indoor ski-slope in the desert on camel tears alone, you must have dinars, and drachma and dollars and yen; and many billions of it, too.
After many years of watching the profligate ways these countries have spent their oil wealth, I can only offer another old adage: you reap what you sow.
Welcome to the Global Economy…