Saudi Arabia Wants Oil at $75
Saudi Oil Minister Ali Maimi said OPEC will be shoring up falling prices when it meets on Dec 17th in Algeria. The price of crude stood at about $147 a barrel in mid-July; now it is trading in the range of $50-$60.
The collapse of oil price puts pressure on many of the OPEC countries, who depend on oil exports for revenue. Saudi Arabia, for instance, noted that $75 a barrel oil will insure continued investments in petroleum infrastructure projects. At the present level, investments have frozen and will likely threaten future supplies.
Venezuela and Iran, on the other hand, would like to see oil in the $90 range as they depend on oil revenue to prop-up domestically unpopular regimes.
In the upcoming meeting, OPEC will likely face one of the toughest challenges in the cartel’s history. On one hand, all countries could benefit from higher prices, but that necessarily means cutting production, which some countries may not be willing to do. In addition, current oil prices may help economic giants such as the US avoid a deep recession and in turn stimulate future demand. Should the cartel focus on short-term price goals or long-term demand?
Given the conflicting nature of the issue, the meeting in Algeria probably won’t be pretty. Who will Hugo Chavez call “facista” next? And how do you say “¿Porque no te callas?” in Arabic?
