Word: opec
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...seemed ready for the obituary columns. The oil ministers of the 13-nation group, which once cowed energy-importing countries and commanded banner headlines with every pronouncement, had become a group of divided and argumentative men, powerless to halt a long slide in petroleum prices. Last week, though, OPEC suddenly sprang from its deathbed and caught the world's attention once again. After nine days of tense meetings in Geneva, the cartel adopted a plan to slash its daily oil production by some 17% in the hope of driving prices back up. The move, like the appearance of a ghost...
...market reacted immediately and forcefully to the new plan, which calls for OPEC to reduce its production by roughly 3.5 million bbl. a day, down to a daily total of about 16.7 million bbl. The price for next month's delivery of the benchmark West Texas Intermediate crude jumped 30% in two days, to $15.08 per bbl. and closed the week at $14.82. Boasted one OPEC official: "We have weathered the storm. Talk about OPEC on its knees? We are standing tall again, and we are here to stay...
...accord, though, is a fragile one. Many observers are skeptical about the ability of OPEC to hold to its quotas in the face of a worldwide oil glut. Never in its 26-year history has the group sustained production cuts for any length of time. One or more of its members have always managed to cheat on agreements. Moreover, the current plan is only an interim one. It takes effect on Sept. 1 (the delay results mostly from existing contracts that must be honored) and expires on Oct. 31. The cartel has no guarantee that its members will renew...
...OPEC somehow sticks to its agreement and prices keep rising, heavily indebted petroleum-producing nations like Mexico and Venezuela would clearly enjoy a boon. The production cut would also help the oil-patch states in the U.S., which felt the pinch as the price of Texas-grade oil fell from about $27 per bbl. in January to a low of $9.75 in April. Consumers, though, would face more expensive heating oil and gasoline, and if prices continue to climb, the increase could rekindle inflation and eventually weaken the world economy...
Sheik Yamani is Saudi Arabia's representative to the Organization of Petroleum Exporting Countries (OPEC), a cartel of oil-rich nations currently experiencing severe problems in the glutted market. The Saudis, largely viewed as the leader of OPEC, are the largest petroleum producers in the world...