OPEC split on raising oil output
Bob Moon: A surprise announcement from the global oil cartel OPEC has already pushed prices back above $100 a barrel. The 12-nation group declared it will keep production levels steady. For some analysis of what’s behind this, we turn to professor Kent Moors of Duquesne University. Thanks for joining us, sir.
Kent Moors: Well thank you, Bob.
Moon: Most analysts, I think, were expecting OPEC to increase production. What happened here?
Moors: Well I think we’re seeing the first public indications of a much more deeper division in OPEC. And that division is essentially between Iran on the one hand and Saudi Arabia on the other. Iran, Venezuela, to a lesser extent, Kuwait, are clearly of the opinion that the production ought to be restrained, thereby to keep the international price elevated. Whereas Saudi Arabia is of the opinion that the high price is beginning to discourage demand and that will have an adverse impact.
Moon: Does it look like Saudi Arabia, as it’s signaled, might go it alone and increase its own production?
Moors: Well it can do that and it’s done that in the past. In fact, if they decide to turn the spigots on, they will have an impact. It probably may be as much as $5 to even $10 on the barrel on the market. We do have to recognize that the primary excess supply that can be put on the international market in a matter of hours is almost entirely Saudi. The problem is that by mid-2012 to the end of 2012, we may already be at or exceed the demand levels that that Saudi excess capacity could easily satisfy.
Moon: So let me ask you the $64-a-tank question: When are gas prices going to go down?
Moors: Well gas prices probably have gone as much as they’re going down nationally. We’re not going back anywhere close to $3.30 or thereabouts.
Moon: Well despite that, I will still say thank you professor Kent Moors of Duquesne University.
Moors: Thank you, sir.
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