So much for OPEC cutting production – while Saudi Arabia’s state oil company has been talking about cuts to the major oil companies, it has told its key customers there will be no reduction in supply this month or next. And if the Saudis aren’t really cutting, what the rest of OPEC might do doesn’t matter.
That realisation took west Texas crude back under US$59 a barrel last night with forecasts for further falls on expectations of a mild winter and ample inventories. Bloomberg has details, indicating the ratbag Nigerian government and the anti-American Venezuelan are looking lonely with their claimed cutbacks.
Falling oil prices might be about the only good news on offer for Republicans seeking re-election – which should give political conspiracy theorists plenty to work on with the relationship between the House of Saud and the Bush White House. Sure, Bush has been a disaster for the Middle East but the Saudis have more to fear from radical anarchy in an Iraq wrecked by civil war once the Coalition of the Willing and Easily Led withdraws. The Democrats on a roll could bring that day closer.
Domestically, petrol prices getting down close to $1 a litre is no longer science fiction. If there is a direct correlation between prices at the pump and political popularity, incumbent governments, state and federal, will be pleased. It seems like only yesterday that Howard was warning that petrol prices were a big political threat…
“History shows that OPEC deals only work when the Saudis are on board,” Bloomberg quotes Bill O’Grady, an analyst with AG Edwards & Sons. “Allocating the cuts is always the problem. The poor countries want the rich ones to take the hit and the rich ones will only do that if a cut is in their best interest.”
“There are a lot of reasons for the Saudis to keep on pumping at the present rate. The Saudis will do what is in their best interest both economically and geopolitically. Lower prices will hurt rivals in OPEC such as Iran and Venezuela.”
And help George Bush and John Howard.