OPEC gauging another production cut
TEXT OF INTERVIEW
Bill Radke: When recession hits and people stop demanding so much foreign oil and other imports, at least trade deficits fall. The Commerce Department said this morning the U.S. trade imbalance hit a six-year low in January. A lot of people are wondering how low oil demand can go, including the OPEC ministers meeting this Sunday in Vienna.
That is where Carola Hoyos is. She’s chief energy correspondent for The Financial Times. Carola, some OPEC members have called for another yet production cut. What are the odds that’ll happen?
Carola Hoyos: . . . I’ve been covering OPEC for a long time, and this may be one of the first meetings where I just don’t even have a clue. They’re definitely not going to boost production, but it depends whether they see the glass half empty or the glass half full.
Radke: Well let’s start with the glass half empty. We hear a lot about demand having dropped, the recession seems to be deepening. Why wouldn’t the ministers cut production?
Hoyos: Well one of the main reasons they wouldn’t is that we’ve actually seen oil prices level off somewhat. We’re back to kind of $47 a barrel. So that’s a good thing for them. Not great, they want them to be higher. And Saudi Arabia is saying look boys, until you guys comply better, we shouldn’t make any more cuts. And ironically, those countries that are not complying are arguing the opposite — they say that the OPEC cartel as a whole should make more cuts rather than harping on the compliance issue. And dare I single out Venezuela in this case.
Radke: So for those of us who might be affected by all of this, how directly would a production cut translate to higher energy prices?
Hoyos: It can result quite quickly in a change in petrol pump prices, but I think the overarching thing that not only we should think about but OPEC is clearly also going to be thinking about is that if they become too successful in cutting oil production, if they cut too much, they may well end up hurting the economy more. And that’s not only bad for you and me, but it’s also bad for OPEC. Because if the economy goes even further into a tailspin, it’ll be using less crude oil.
Radke: Carola Hoyos of The Financial Times. Thank you.
Hoyos: Thanks.
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