OPEC calls emergency meeting as oil prices fall

By Jad Mouawad

Published: October 17, 2008

Oil prices dropped below $70 a barrel for the first time in 14 months Thursday, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months.

Oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel.

The decline in oil prices could provide a form of stimulus to the global economy as consumers pay less to fill up their tanks. If oil prices stay at current levels, American consumers would have $250 billion more, over a year, to save or spend elsewhere, according to Lawrence Goldstein, an energy economist. Some analysts expect oil prices to keep declining, perhaps to as low as $50 a barrel in coming months.

Americans will probably see lower energy bills this winter, as gasoline and heating oil futures also dropped sharply on Thursday. Gasoline prices now average $3.08 a gallon, or 3.8 liters, down from a summer peak of $4.11 a gallon, according to AAA.

The decline in oil prices came after a U.S. government report showed domestic crude oil stockpiles rose more than expected as Americans use less oil, in part because they are driving less. In the last month, domestic oil demand has fallen to its lowest level since June 1999, at 18.6 million barrels a day, according to the Energy Department.

Oil settled down $4.69 a barrel, at $69.85. The drop, along with other promising signs on the inflation front, was among the reasons investors bid stocks higher, with the Dow Jones industrial average closing up 401.35 points at 8,979.26.

Natural gas prices have also tumbled since their summer peak of $13.58 per thousand cubic feet, or 28 cubic meters. On Thursday, natural gas futures rose 19 cents, to $6.81, after a report showed that stockpiles rose less than expected.

While consumers may have reason to cheer the falling oil prices after such a sharp run-up, the wild roller coaster of volatility is a nightmare for oil producers and petroleum executives who say they need more stability to plan long-term projects to develop new sources of oil.

If they cannot be confident that they will get a stable return on their investment, they may hold back. That in turn could set the stage for possible shortages of oil and higher prices when global demand picks up again.

The sharp drop-off has forced OPEC's hand. The cartel said just last week that it would meet in mid-November, after the United States elections. But on Thursday, it rescheduled its emergency session for next Friday.

The cartel's producers, which control 40 percent of global exports, could curb their output by about a million barrels a day to try to stem the drop in prices, according to analysts.

It is unclear what price range for oil the cartel wants to establish. But the meeting "sends a clear signal that OPEC is concerned about the speed with which oil prices are slipping away from a preferred price of around $80 a barrel," said Lawrence Eagles, an oil analyst at JPMorgan.

The Iranian oil minister, Gholamhossein Nozari, told reporters in Tehran on Tuesday, "I think the low price is a real damage to the future of production."

From its inception, the oil industry has gone through countless cycles, with oil companies cutting investments when prices fell. The price collapse of the 1980s forced companies to slash investments and prompted a wave of large mergers through the industry. But this retrenchment left the world scrambling for oil when demand from Asian and Latin American economies soared.

Concerns that this pattern might be repeated were mentioned frequently during an industry conference in Venice last weekend, where oil executives said they worried that a prolonged recession, tighter credit and lower energy consumption would mean slower growth in energy supplies in coming years.

The credit freeze has already forced some projects to be scaled back, some energy analysts and executives said. "This is a real test," said Jeroen van der Veer, the chief executive of Royal Dutch Shell, in an interview at the conference. "Some people will be overstretched, and there will be some delays in some projects."

Over the last decade, growth in oil consumption has outpaced the ability of producers to meet that demand with more production. Many experts have predicted a new squeeze within the next five years that could once again propel oil prices over $100 a barrel.

The drop in prices has already created problems for oil producers. Iran and Venezuela both need oil prices at $95 a barrel to balance their national budgets, Russia needs $70 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. The Algerian oil minister, Chakib Khelil, said Thursday that the "ideal" price for crude oil was $70 to $90 a barrel.

In Russia, which is not part of OPEC, the drop in prices is threatening the country's ability to increase production. The Russian government has reportedly agreed to allocate $9 billion to its four major producers — Lukoil, Gazprom, Rosneft and TNK-BP — to help them cope with investment needs amid the credit crisis.

In the United States, Chesapeake Energy, a gas producer, has recently indicated it will reduce its capital investments over the next few years in response to falling prices.

Global oil demand is undeniably slowing down, particularly in developed nations. Japanese oil consumption tumbled by 12 percent in August over the same month a year ago, while in the United States, demand fell by 8 percent in September.

Consumption is still growing in developing nations, but at a slower pace than in recent years. The International Energy Agency expects global oil demand to grow by just 400,000 barrels a day this year, to 86.5 million barrels a day. The agency, which had been revising downward its predictions all year, forecast growth of 2 million barrels a day for 2008 when the year started.

The two-day energy meetings last week were held in private in the baroque setting of the island of San Giorgio Maggiore, home to a 10th-century Benedictine monastery. In many conversations with senior executives outside of the conference meetings, they voiced concerns about their industry becoming increasingly vulnerable to a slowing economy.

"We pretty much know where supplies are going to come from in future years, but today the biggest uncertainty is demand," said Christophe de Margerie, chief executive of Total, the French oil company.

Some executives, though, are still holding out hope that Asian economies may weather the economic storm and help the global economy recover faster. Lower oil prices could also make it harder for some companies to survive on their own, leading to a new wave of mergers and acquisitions.

"This new environment is not all doom and gloom," said van der Veer, of Shell. "It can also provide some opportunities. Certain assets may become available."

Do you want to know why Iran has a nuclear program?

The principal lesson taught in school regarding personal finance is that everyone should have at least a five-year business plan. Creating such a plan forces us to take inventory of what we have, allowing us to figure out what we need to do to be able to prepare for what our needs may be for the future.

This concept is also applied to collectives, such as corporations, communities and countries. The larger the collective the further into the future the business plan should foresee.

This is where Iran’s nuclear program comes in. You see, even though we may be under the assumption that an oil well will produce oil indefinitely, reality is much different. One of the most important observed properties of oil wells is that they follow Hubbert’s peak theory postulate, “that for any given geographical area, from an individual oil-producing region to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve.”

click to enlarge - source

“Early in the curve (pre-peak), the production rate increases due to the discovery rate and the addition of infrastructure. Late in the curve (post-peak), production declines due to resource depletion. The Hubbert peak theory is based on the observation that the amount of oil under the ground in any region is finite, therefore the rate of discovery which initially increases quickly must reach a maximum and decline.”

According to a 2007 report (PDF) by German based Energy Watch Group, many countries have already gone past peak oil.

click to enlarge - source (PDF)

We don’t know where on the peak oil curve Iran is right now, but even if they have not reached peak oil production yet, it is safe to assume that they will shortly. This means that Iran must begin to look for other sources of energy for its future, just like many other countries. At present, the primary choices available for power production are very limited. They are hydro, gas, coal and nuclear – with nuclear giving the biggest bang for the buck.

“At the moment there are more than 400 nuclear power plants all over the world, which produce about 17% of the world's electricity. The share can range from just few percent in some countries up and to 75% as in France.”

According to the data available at the Nuclear Training Centre (ICJT), the United States has 104 reactors connected, however this is not enough to satisfy America’s energy needs, which is why “John McCain is pushing for the construction of 45 new nuclear reactors by 2030.” This means that the United States with a population of approximately 300 million would have 149 reactors.

click to enlarge - source

Iran has a population of over 71 million and it must have a plan in place to supply energy to its citizens in the future. Their oil and gas are non-renewable resources, which means that they will be running out at some point. The implications of this are beyond what our politicians and the Western mainstream media present.

Iran has a nuclear program because their government has done the calculations and realizes that if they are to survive they will need alternate sources of energy. Considering that nuclear power is the least problematic based on certain global warming hypotheses, they are pursuing the only and best choice available to them.

What makes those countries that already have nuclear power think for one second that they have the right to deny others the same privilege? If Iran is denied the right to develop nuclear power then other energy-starved countries will also be denied.

Do we actually believe that we have the right to do this? And even if we think that we do, do we actually believe that people living in countries that have yet to develop nuclear power will refrain from developing the technology just because we say so, especially when they see us enjoying all the benefits that comes with access to almost unlimited energy?

If we try to deny Iran the right to develop this technology, then we are essentially telling them that they should remain a developing nation indefinitely, while they watch their lifestyle deteriorate as their oil and gas supplies slowly dwindle.

The conflict between Iran, the US, and Israel is about the survival of a tribe, of a culture, of a country. Iranians and the peoples of other countries that find themselves being denied energy will fight for their right to develop a reliable energy source, after all, under the Nuclear Non-Proliferation Treaty, they have the 'Inalienable Right' to Nuclear Energy. Are we really ready to start a war to deny them their rights? Do we actually believe that we have the means to do so?

What a predicament our leaders have put us in.

I think the best way to resolve this crisis is to ask ourselves what we would do if another nation threatened us for developing technology that could supply the energy requirements of our country.

Hey Rupert? What Happened To All Those Post-Saddam $20 Barrels Of Oil?

Oil Touches $100, But Will Go Beyond In 2008

By Darryl Mason

yournewreality.blogspot.com

No power king on the face of the planet did more to warp reality than Rupert Murdoch in helping to create the American mindset that backed the War On Iraq in early 2003.

Using his massive media blitzkrieg marketplace control in the US, the UK and Australia (70% of all daily newspapers), Murdoch pumped the always extremely dodgy case(s) for War On Iraq with all the desperate enthusiasm of a Depression-era carnival huckster with two families to feed and a baseball bat wielding loan shark taking aim at his kneecaps.

You must remember what Rupert had to say about how good the Iraq War would (could) be for the price of oil, right?

In case you've forgotten, here's Rupert Murodch, from February 12, 2003, as quoted in the Australian Financial Review :

"The greatest thing to come out of this for the world economy, if you could put it that way, would be US$20 a barrel for oil. That's bigger than any tax cut in any country."

Rupert won over a lot of people with that prediction. A lot of business and oil people anyway. A lot of media people, too. Particularly his media people.

They really believed that getting rid of Saddam would let them control the majority of Iraq's oil, and flow another 4 or 5 million barrels a day into world markets. Invading and occupying Iraq was also going to help free the United States from its terror-soaked death grip with the Saudis, who were, and remain, the dominant force in Middle East oil.

How dominant? More than a dozen of Saudi Arabia's countrymen allegedly carried out the 9/11 attacks, and BushCo. paid them back by, errr, bombing goat herders in Afghanistan and flying out dozens of members of the Bin Laden family from the United States under the protection of the CIA. Talk about a hardline.

But even though Murdoch could spin Wall Street, and readers of the financial media, he never really convinced most of the readers of his tabloid print and TV media, even though the pro-war message was relentless and unforgiving. That's why more than ten million people around the world marched in protest against the Iraq War in early 2003.

Murdoch's media ranted and raved and spite bile at all the protesters, even the World War 2 veterans and the little kids with their hand-drawn signs saying 'Please Don't Kill Iraqi Kids'. Murdoch's media labeled veteran and child alike a bunch of Saddam sympathisers and terrorist-enablers, sometimes on the front pages of the newspapers. Before the protests even began.

But they still marched. In cities, towns, villages, even along country roads where the only people to see them were interstate truck drivers. In the United States, in England, in Australia, the United States, Canada, across Europe, across Asia.

Even though Rupert controlled the vast majority of tabloid newspaper markets in Australia, the UK and the US, and he directed them all too, as one former Murdoch journo told me in 2004, "really get behind this now", he could never get the majority of the people in Coalition Of The Willing nations onside for the Iraq War. They didn't have to step in it to know it was bullshit from the get go.

When the Iraq War began on Mach 21, 2003, more than 70% of Australians opposed the illegal invasion and occupation. The opposition was higher in the UK, and much less in the United States.

For most people, already trying to deal with rising fuel price, the only thing the Iraq War had going for it was Rupert's claim that $20 a barrel oil would likely be the result of massacring Iraqis.

So where are we now, four and a half years on from Rupert's infamous "$20 a barrel" quote?

Oil is closing in on $100 a barrel, and the financial media is discussing how oil beyond $100 a barrel will effect economies around the world.

Venezuela is happy, Iran is very happy, Russia is happy, Canada is happy, Mexico is happy. East Timor, if oil prices stay this high, will also soon be very happy. The Saudis? They're fucking ecstatic. They'll have to start burning money logs soon just to get rid of all that cash.

If you're an excess-oil-producing nation (meaning you produce enough to sell on international markets) you're probably burning candles and bowing down before shrines of President Bush, Dick Cheney and the coterie of NeoCons who have done so much in the past few years to unleash so much havoc and destruction and fear and chaos across the Middle East, further destabilising the confidence of the world's oil markets.

Without Bush, Cheney and all those NeoCons and let's not forget the Iraq War enabler himself Rupert Murdoch, the 'evil' leaders of Iran, Venezuela and Russia would not be so rich and powerful.

How rich? How powerful? Well, think about this. Venezuela, Iran and Russia now owe international creditors next to nothing. They've paid off once near crippling loans to the World Bank and IMF. Collectively, they owe a few billion, less than $10 billion, tops.

And the United States? Trillions in debt. Not billions. Trillions.

Who knows? Maybe there really is something in the ultra-weird conspiracy theory that the leaders of Iran, Venezuela and Russia are secretly working in cahoots with President Bush's oil baron friends to drive up the price of the black gold. It would probably make sense around the boardroom table. Everyone gets rich.

Except for you, of course.

After all, we keep hearing about a looming War On Iran, it's always just a few weeks away, but it hasn't happened yet, has it? Flicking back through my files I see stories from 2003, saying that Bush would launch air strikes on Iran "within weeks". That's more than four years ago now.

And look at Venezuela. Chavez has never been so powerful, or so popular. His anti-American rhetoric, and his interference in how American corporations suck oil from his nation, have helped to make oil a very, very unstable commodity. Chavez, compared to the days before the CIA tried to assassinate him, is now leading one of the most oil-rich socialist nations on the planet. And thanks to all that oil wealth, Venezuela is soon to become even more socialist.

Questions.

So many unanswered questions.

What about the new Oil Shock? Isn't oil running out? What if Venezuela cuts off supplies to the US? Is the Iranian president really crazy? Does he actually believe in the 12th Iman? Is he going to sink oil tankers in the Persian Gulf and disrupt more than 1/4 of the world's oil from getting to market if Israel nukes his reactors? What if Iran bombs Israel? What if Israel bombs Syria? What if Turkey invades Northern Iraq and that oil pipeline up there goes up in flames? And what's with Putin? Could China and Russia really go to war with the US to protect their hundreds of billions of dollars worth of new business interests in Iran? What would that do to the world's oil supplies?

And up and up and up the prices go.

Where they will stop?

Nobody knows.

Well, they'll have to stop before $200 a barrel. That's the price where even the most optimistic economists say the world's economies will grind to a halt.

And nobody wants that.

Well, not yet.

"The greatest thing to come out of this for the world economy, if you could put it that way, would be US$20 a barrel for oil."

Thanks for that, Rupert. It's one of the greatest misguided, or false-positive quotes since all those quotes in the 1940s where scientists and radio station owners said "this TV thing" would never take off.

Now, the chaos in Iraq, mostly unleashed thanks to the Murdoch-backed war, is not the only reason why oil is now closing in on $100 per barrel.

But it sure isn't helping.

It's amazing to remember that President Bush, and others, particularly in Murdoch's worldwide media, pushed the line that Iraq would, within only a few short years, be pumping oil to the tune of 8 to 10 million barrels a day. That was how the reconstruction of Iraq was going to be paid for. Before the American taxpayers got shaken down for more than $600 billion. And probably another few hundred billion more.

The Council On Foreign Relations, the Vatican of nutcase war pigs and NeoCon destroyers-of-nations, also pushed the line back in 2002 that the Iraq War could only mean good things for the price of oil. They failed to tell us, however, that when they meant "good things" they weren't talking about oil at $20 a barrel.

How they all must have laughed when Rupert Murdoch said the Iraq War could see oil prices plunge from $30 or $35 a barrel (late 2002 prices), down to a measly $20. That would have showed those damned Saudis and Iranians - wink, wink.

But instead, we got oil closing in on $100 a barrel, and a tank of petrol becoming the sort of luxury expense that millions of Americans, Australians and Brits are increasingly unable to afford so they can, you know, get to work.

A few hundred years ago this pack of clowns now purposely driving up the price of oil to once unimaginable prices would have been hung in the village square and pelted with cow turds.

Now they sit back and watch their stock prices soar. And they're doing it in the US, in the UK, in Australia, in Venezuela, in Russia and across Europe. And of course, in Saudi Arabia and Iran.

Welcome to the New Poverty. It's pretty much like the old poverty, but much, much worse. You'll be poor, you'll be able to only eat shit food, but you'll still have a job. However, you probably won't be able to afford the fuel to get to work.


UPDATE : To be fair to Rupert Murdoch, he did get one prediction right from the days before the War On Iraq was unleashed. And that was this prediction about President Bush if he didn't end up 'winning' the war :

"He will either go down in history as a very great president or he'll crash and burn."

Crashing and burning.

8 comments:

Anonymous said...

Great essay, and so true.

Roger Ailes Brain Tumor said...

Excellent work. Best rant I've read in ages. Murdoch's a lying shitbag.

May the souls of Iraq's dead children haunt his every sleeping moment for the rest of his life.

$20 barrels of oil? Would you like to buy a bridge as well? How about a moon of Jupiter?

Tom TQ said...

"hung in the town square and pelted with cow turds"

love it, I can see it in my mind

wonderful

never stop fighting said...

too late darryl

all we have left is our guns and our right to bear them against the ones who want to disarm us

FUCK THEM ALL!!!!

don't be intimidated

don't be afraid

don't let them deny the rights you have left while you still have them

THEYRE COMING FOR ALL OF US!!

cold dead hands said...

Never Stop Fighting..


Truer words ever spoken


Theyre coming for you me and everyone in between.

American insurgency looms.

Know who you're real friends are today. You need to know people you can trust.

cold dead hands said...

Never Stop Fighting..


Truer words ever spoken


Theyre coming for you me and everyone in between.

American insurgency looms.

Know who you're real friends are today. You need to know people you can trust.

Anonymous said...

Cold Dead Hands


your message was so important you had to post it twice eh?

post it a dozen times and more!

believe it my friends

They're coming for all of us

Lady Broadoak said...

I used to drink with Rupert & Co in NYC .. man! They don't drive themselves and have to pay at the pump or anywhere else. They don't buy Conrail passes or hightail it in from Long Island. They haven't a CLUE what transpires in the real world, they don't care to find out either.

Their minds and hearts are as toxic as BuZh&Co and the other Texas Boyz. And them coming together at the bar was a pretty mutually exciting proposition ..

As long as the bartenders keep pouring their drinks, as long as their medical doctors keep giving them pills to pop, as long as their credit cards keep them ca$hless and smoothe their way and as long as the Fed Reserve keeps cutting down trees to print money on, they are happy. As long as they keep their fancy little restaurants to "dine" in, they'll be in there, hanging out together creating new victims for a very sick system.

To them, individuals are just numbers to move around on piecharts or excel spreadsheets to prove their points.

Murdoch and the neoCONS have this in common - they AREN'T nice (to anyone at all), they couldn't care less about anybody but themselves and those they get stoned with.

When bar closing time hits and they are aggressive - stay outta their WAY. They'll take you down or get someone to do it for them.

Never let these guyz drink on YOUR side of the bar, NEVER.

If someone suggests you believe a SINGLE word they say, have a talk with the bartender who will assure you that they aren't gentlemen!!

It's high time these drunken idiots were INTERVENED and put away, as their truly erratic behavior and delusions were exposed and shown for the INSANITY it really is.

As for only having our guns left? They're controlling the ammo supply. What good are the gunz?

Hug your families instead. Start doing arts and crafts. Talk a nice long walk. Learn to enjoy watching seeds grow. Keep an inner smile. Listen to Meatloaf .. they cannot rock N roll ..

You've done a fine job with their total insanity in this essay.

It's time to 86 them once and for all!! or as we say in Canada, TURF THEM OUT!

Cheers! (as I hoist a V8 cocktail salute to you)