OPEC’s president warned oil prices could hit $200 a barrel, and added there is little the cartel could do to help.
The comments made by Chakib Khelil, Algeria’s energy minister, came as oil prices hit a historic peak close to $120 a barrel, putting further pressure on global economies.
His remarks suggest Algeria wants OPEC to continue to resist calls by US and European leaders for the cartel to pump more oil to help ease prices. But Mr Khelil blamed record oil prices on the weak dollar and global political insecurity.
He told El Moudjahid, Algeria’s government newspaper: “I don’t think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years.”
Data from the EIA confirms Khelil’s remarks about US gasoline stocks. However, he did not mention that US gas stocks have only slightly increased in the past five years. Gasoline stocks in the United States have increased a mere 5% and have been relatively flat over the past two decades.
And it’s complete bull that an increase in production would not lower oil prices. Of course an increase in production would lower prices. Why wouldn’t it? It makes no sense that more supply on the market wouldn’t mean lower prices. What Khelil is really saying is that OPEC is not going to increase production because the demand is still high. OPEC willl only increase production to stimulate demand, not lower prices. Besides, why would they want to do that? If you were producing a product that had rising prices due in part to rising demand, would you increase production to lower both? Of course you wouldn’t.
Khelil went on to add: “The prices are high due to the recession in the United States and the economic crisis, which has touched several countries, a situation that has an effect on the value of the dollar. Each time the dollar falls 1 per cent, the price of the barrel rises by $4 and of course vice versa.”
Here’s another load of bull for you. Oil prices are not high due to the recession. The recession is due (in part) to high oil prices.
We have to remember that OPEC is not on our side. OPEC’s only goal, like every other business in the world, including yours and mine, is to make as much money as possible. So I do not, or cannot, damn OPEC for running a successful business. All’s fair in love, war, and business.
Our goal is to try to work around them and situate our lives so we don’t need OPEC.