Word: opec
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...Just how would you raise prices if you were an oil supplier? Controlling the supply - as in the 1973 OPEC embargo - has become less effective with more sources of oil worldwide. And oil suppliers clearly cannot raise prices by controlling demand in the physical oil market; ultimately, they need to sell their oil, not buy it. However, with the market inefficiencies that we expose here, oil suppliers can regain the upper hand by artificially inflating demand using a different market. To understand this mechanism, we must take a glimpse into the future - the futures market, that...
...week when oil prices shot to $143 a barrel, the mood at the World Petroleum Congress in Madrid is surprisingly somber. Perhaps the oil company CEOs and OPEC ministers, gathered for the biggest conference in the industry's calendar, are feeling besieged by the relentless drumbeat of public outrage. Perhaps they have been worn down by their ongoing efforts to blame each other for spiraling prices. Or maybe they just think it in poor taste to gloat about their record profits. But even Monday's news that Iraq would open six of its oil fields to international contracts - news that...
...OPEC Conference president, Chakib Khelil, however, insisted that producing countries - or at least OPEC members - were mainly free from responsibility. "It's not an issue of supply," says Khelil. "I'd estimate that $45 of the price comes from speculation, from the U.S. subprime crisis, from the weak dollar. Most of the price comes from the dollar's devaluation...
...Even the general agreement on the need for more investment to answer that question came with its own polemics. "Exxon will spend $1.25 billion on research," said ExxonMobil CEO Rex Tillerson. "My company alone is investing at a rate of 60% of OPEC's." But asked what the OPEC was investing to secure future demand, Khelil responded by suggesting his organization was being unfairly targeted. "What are other countries doing? Why don't you ask Brazil? Why don't you ask China? Those aren't OPEC countries," he said. Meanwhile, BP's Hayward blamed high taxes for stymieing necessary investment...
King Abdullah's seemingly generous offer of a billion dollars from OPEC countries (plus $500 million from his own treasury) to help poor countries cope is also nothing to be grateful for. It amounts to backdoor price discrimination: charging different customers different amounts to extract the maximum from each...