OPEC cuts oil production by 1.5m barrels a day

[Matt Herring]

Emergency meeting by OPEC results in 1.5 million barrel per day cut in production (and by "emergency" I'm sure they mean gas was accurately priced at $4 a gallon US in July???). I'd like to see the good ole' USA (and the rest of the world) man-up and continue to cut fuel consumption. No edict from OPEC can reverse the cost of a barrel of gas if we continue to consume less regardless of how much (or little) they produce short of cutting off all production for a specific period of time (which is quite possible if history is a good lesson).

Story link posted below...

OPEC agrees sharp output cut, oil slide goes on | U.S. | Reuters

[SVOboy]

Too bad no amount of US reduction in the coming years will balance out the increasing use in Asia and Africa.

High gas prices are here to stay, and I somewhat sympathize with OPEC desire to have a stable price. You'll notice they're trying to stabilize it at ~100, not at ~150, which is where demand took a serious hit. If gas prices fluctuate wildly everywhere then funding for things like EVs will do the same. Not to mention governments and companies won't be able to budget anything properly and such.

[Matt Herring]

About half of OPEC called for cut of 2.0 million barrels a day while the other half called for something closer to 1.0 million barrels a day. Settled on 1.5 million barrels a day although it will eventually settle in the 1.8m range.

High gas prices ARE here to stay and this past summer's $4+/gallon prices IMO will be a drop in the bucket compared to future prices. We're "enjoying" $2.50/gallon right now.

[SuperTrooper]

Multiple time in the past week OPEC has stated they would like prices to stabilize at about $70/barrel. The problem is the worldwide economy is going in the toilet so consumption is greatly reduced. Hello, it's supply and demand rearing it's ugly head on a global scale. Americans drove 12% fewer miles in September vs a year ago. That was reflected in the price drop, then adding capacity from refineries off line due to hurricanes coming back on line.

The shaky economy will keep prices low as people reduce expenses as a buffer against inflation. Folks are keeping the savings at the pump or using it to pay other bills. Fortunately, the surplus is also reflected in reduced heating oil prices just as the heating season hits. This will help lessen the pressure on govt heating plans that were predicted to run out of $$ before the winter was over at the higher prices.

This isn't all just about the price of gasoline.

[Matt Herring]

If OPEC wanted to keep the price of a barrel around $70 why did they not hold an "emergency meeting" to stabilize the cost down from $147 in July (more than 100% higher than where they would like it to "stabilize")?

Saudi Arabia produced the most oil it ever has when the cost of a barrel was at its highest. Do you think they did that so because of supply and demand or were they "high on the hog" making as much "expensive" barrels as possible before prices dropped? If you sold widgets and the price of widgets went up 100%+ but demand was dropping would you produce more widgets than ever?...of course you would because you are getting the most money you've ever received for your widgets...ahhha...sounds like a company to me!

I don't know why so many people are quick to defend OPEC regarding stabilizing the price of oil and then just as quick to complain about oil companies posting record profits in the past year. OPEC should be viewed as a company (that's what they are). The countries (OPEC "board members") profit directly from that which they produce. They are not a regulatory agency (like the US Fed) simply setting prices or interest rates to balance the world economy.

If you think OPEC cares about stabilizing the cost of a barrel of oil around $70 I have a bridge to sell you in Brooklyn. They like the cost of a barrel of oil to be "one tick" under consumer panic (what occurred when it climbed to $150 this summer).

[SVOboy]

Who said anything about defending OPEC while complaining about oil companies? I haven't seen oil companies mentioned, and anyway, we live in a free market, if oil companies want to and can make money, they will, just like any other business. That said, I don't believe in unfettered free markets and would rather see the oil industry nationalized.

Also, just because I group wants to make the most money off of their product doesn't mean there isn't a valid interest in stabilizing prices. All they're trying to do, economically, is create a bottom so that they can have an expectable amount of profit. Do you forget that this is the money that runs their country? If the US was an oil exporter and was suddenly taking in half as much money as it used to be, wouldn't you be concerned about things like major cuts in government programs and increased taxes to offset that burden? I would be. Everyone is going to protect their own interests in this world and I don't think they're doing anything unreasonable here by deciding how much of their own resource to sell. They could say they didn't like us and weren't going to sell us any if they wanted!

[Matt Herring]

what i was referring to in my last post was the mention that opec stated they would like the cost of a barrel to stabalize at $70. this doesnt raise a red flag around these parts? so $3 a gallon of gas is acceptable because opec is committed to stabalizing a barrel at $70?

free market or not its sad we now accept $3 a gallon at the pump as acceptable and stabilized. a year from now maybe $4 a gallon is stable for opec.

id like to hear an explanation for the current cost of gas at the pump. imo it starts at the source of the oil...and a barrel that costs the same amount to refine as it did a year ago or 2 years ago ends up being $2 or $3 more now. why was a barrel $150 in july...was there a gross undersupply of oil...nope. so supply and demand as was previously suggested is not valid. if the sketchy economy is to blame as was also suggested in the same post then we should expect approx $1.50 a gallon when the world economy turns around right? wrong..not if opec thinks $70 a barrel is stable.

[Compaq888]

They are just trying to stuff their pockets. I don't really agree with them but it was really hard to gas up my car when gas was $4+

At least with prices at $3 a gallon I can fuel up my car and drive it for 1.5 weeks. With $4+ a gallon I would drive only for 4-5 days.

I drive a civic and everything but if prices hit $4+ I don't know what I'm going to do. I'm barely getting by as is. Like they say the richer get richer and the poor get poorer.

[TestDrive]

Here are three quotes from an article about this in Christian Science Monitor; a few calculations; and my personal opinion about what the numbers will mean.

The Organization of Petroleum Exporting Countries (OPEC) Friday announced a slash in oil production of about 5 percent, or 1.5 million barrels a day, ...

Mr. Halff notes that members of OPEC, which supplies 40 percent of the world's petroleum, often secretly go over their assigned quotas or fail to reach them because of production problems.

5% of 40% of World Production = 2% of World Production.
And if 1.5 million barrels is 2% of World Production, then total World Production must be about 75 million barrels a day.

In the US, the world's largest oil consumer, demand for petroleum products in the past month averaged 18.6 million barrels a day, down 8.9 percent from the same period last year, according to the US Department of Energy.

18.6 million + 1.82 million = 20.42 million
1.82 million / 20.42 million = 8.9%

Based on the above numbers, I'd guess that oil and gas prices will fall some (a little) more. I'd also guess that OPEC will meeting again and announce further cuts within the next 60 days.

[Arminius]

Oh boy....

Beutel: Crude Could Hit $20 A Barrel - Oil and Gas * Energy * News * Story - CNBC.com