Word: opec
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...worry about. Last week the government reported that the domestic economy barely has a pulse. It grew at a 0.7% rate in the second quarter, the weakest in eight years. Yet beyond Argentina lurk at least three more insults that could make things worse. In the Middle East, OPEC is flexing its muscles again. Last week it vowed to cut oil production 4% to prop prices. In Europe, the single-currency system called the euro may be fighting for its survival if stagflation continues to cripple the region. And in Asia, Japan's new Prime Minister is struggling to carrying...
...OPEC GETS POLITICAL Since peaking last September at $37.80 per bbl., oil prices have tumbled to below $25. This breather from high energy costs is going to be short-lived. In the past two years, members of the cartel have stuck close to their output quotas, which they demonstrated in last week's announced production pullback. That will bring crude prices above $25 per bbl. again. Should crude top $30 for a prolonged period, it will further eviscerate U.S. corporate profits and have a deeply corrosive effect on the entire U.S. economy...
...chances are rising that OPEC will sharply curb production to both spur higher prices and increase political pressure on Washington and Israel. "The Saudis are set to do this," asserts Marvin Zonis, a political- and economic-risk expert at the University of Chicago. "They are very dissatisfied with U.S. foreign policy in the Middle East, specifically with Israel...
...What It Means to the U.S. Shades of the '70s? No. Non-OPEC oil sources have increased significantly since then. But higher energy costs are like an ugly tax. Consumers shelled out an extra $50 billion last year because of higher gas prices. "The danger is that OPEC could be too successful," says Nariman Behravesh, chief global economist for DRI-WEFA, an economic consulting firm. "If they hang tough with their quotas and oil prices stay high as the world economy slows down, the downturn could be even more pronounced...
Richardson also urges the Administration to drop its laissez-faire stance toward OPEC and exert pressure on the cartel to raise exports of crude oil. OPEC voted this month to maintain its output at 24.2 million barrels a day. But it will meet again in July to consider raising prices if Iraq continues to withhold oil from the market as part of a running dispute with the U.N. over sanctions...