If OPEC frets, the trend must be good
Enough troubles in the world, rightâ¢ So let’s turn to an economic distress story that applies not the least tug to the heart strings.
OPEC fills the bill. The Organization of Petroleum Exporting Countries is the international oil cartel. It should be illegal but hey, these are sovereign nations. OPEC is beginning to have concerns about 2004, which means more of us should feel good about it.
Market conditions are shaping up negatively for OPEC members. Global oil prices are coming down at a worrisome — that is, wonderful — rate, 15 percent in the past month. The average barrel of crude might be $5 lower early next year.
One reason for this terrible (terrific) news is that Iraq is repairing its oil fields and increasing output again. That hasn’t been front-page news, but it ought to be. We mourn the chaos, bombs and bloodshed in Iraq. Not to mention the $87 billion bill for another year’s painful peacekeeping over there. Yet, if OPEC’s fears are founded, some of the cost will come back in lower oil prices whose cents per gallon — or billions of dollars in toto — we may never properly credit. The war was “never about oil,” remember.
Nevertheless, will the “refund” be good for the U.S. economyâ¢ No question.
OPEC held one of its periodic price-fixings this past week amidst the palaces and pastries of Vienna. Its ministers signaled they may have to meet again out of schedule in December to consider reducing supplies. That’s how the hydrocarbon mafia does it.
It sets targets, supply ceilings for each member of the gang and a price range for world markets. The early ’04 target fixing is $22 to $28 a barrel, well down from the 2003 realized average of $31 a barrel.
Should recent price weakness keep up, production quotas may need resetting. Algeria, Kuwait, Saudi Arabia or Venezuela might have to cap some wells. This would let more Iraqi crude flow to market without killing prices. The oil country kingpins’ first priority is to keep that price up. Swiss bank accounts and U.S. investments have to be fed. So far, Iraq’s partial revival hasn’t hurt (that is, helped) too much, but the trend is there.
The ancient Mesopotamia sits atop the world’s second largest petroleum pool (first is the Saudis’). Iraqi production has quietly, surprisingly risen by almost a fifth in just two weeks. That’s to an average 1.9 million barrels a day. Getting close, that is, to the 2.5 million rate that prevailed before the March invasion. And this despite sabotage, looting and power failures.
Oil wealth is one of the modern world’s most ironic blessings. The populations of undemocratic countries that have it never seem to benefit, just the potentates. And look at the saboteurs of Iraq. They can’t bear to let their own countrymen produce natural riches from the earth, because in so doing, they’ll benefit America while, of course, spurring prosperity in their own societies. Nature should have distributed common sense as lavishly as it did crude oil.