OPEC has cried wolf again, but there’s reason to believe that this time, the cartel is serious about constricting oil production. Which, of course, will send the price — and thus the price of gasoline — upward. And there’s nothing American drivers will be able to do about it.
Representatives from the 14 OPEC member nations will meet in Algeria Sept. 26-28, on the “sidelines” of the International Energy Forum. Hanging out by the coffee machine or in the parking lot, they’ll presumably resume discussions about how they should collude to reduce crude output across the board. The member nations, with their budgets in shambles because of the drop in crude prices since June, are clamoring to stop the bleeding.
As The Wall Street Journal reports, Saudi Arabia, the cartel’s big dog, is looking for cash in odd places, including from the Vin Diesel wannabes:
The government also announced hefty fines for traffic violations that include drifting, a practice that involves intentionally skidding and spinning at high speed—a popular pastime for men in a country that notoriously lacks entertainment options.
OPEC has been trying to jack up the global price of oil for a while now: In April headlines screamed that the Saudis and Russia would get together to “freeze” output. But that deal fell through (or was “scuppered,” in the wonderful phrasing by a Reuters headline writer) when Iran, hungry for oil revenues after years of sanctions, balked.
And yet just the hint of an output curb was enough to send prices soaring: Brent crude, the international benchmark, went from $37.69 a barrel on April 4 to $51.95 on June 9. On Tuesday it closed at at $45.34, so clearly the markets aren’t freaking about the latest threat. Neither are most of the oil media. On Monday, after OPEC president Mohammed bin Saleh al-Sada’s prediction that “the current bear market is only temporary,” Bloomberg Gadfly columnist Liam Denning wrote:
“… when you’re president of an organization as weakened and divided as OPEC is, you have to say something,”
But as WSJ’s Summer Said and Benoit Faucon noted, the reason Iran demurred in April is because its own oil production wasn’t yet back at the level it was pre-sanctions, in 2006. Now the country is pumping 3.6 million barrels a day, and by the September meeting it could be close to 4 million, which is in the range “that Iranian officials said they would require before agreeing to a freeze.”
In other words, get ready for prices at the pump to possibly go up in a hurry. As we’ve seen again and again over the past 100 years, there will be no warning or explanation for a spike, other than: it’s oil. It goes up and down. And even with all the oil the United States produces, that doesn’t give us any control over an international market.
The U.S. is back to drilling oil like mad, but we still import about 40 percent of the oil we use (about 8 million barrels a day, of the 19 million we consume). In May, 43 percent of our imports (3.41 million barrels a day out of 7.95 million) came from OPEC nations. Those 14 dudes in a parking lot have a disproportionate amount of control.
PUMP the Movie came out in 2014, and what was true then remains true:
We have about 5 percent of the world’s population, yet use 20 percent of the oil, the vast majority of which is for transportation.
The only way to reduce our dependence on oil — and thus foreign oil — is to ramp up consumption of alternatives, like high-octane ethanol. Giving consumers a choice, for the first time ever, will get prices at the pump low for the long haul.