With respect, I believe you give them too much credit.
Is it genuinely in the collective interest of the group to maintain prices where they are today? Are the global supply/demand data really good enough to fine tune the system? I don't believe so.
There is a price beyond which (and over a long enough period) non-OPEC production increases to the point where it undermines the OPEC producers. I don't know today what that price is, but if I had to guess I'd say it's well below $25. Let's say we've had six months of prices high enough to promote a significant expansion of non-OPEC supply. Another six months, and then the stage is set for another down cycle, even if OPEC holds firm.
Eventually each of the OPEC countries is confronted with a situation not of their own making. They see falling prices, and their production restraint in the short term will make little difference to the rate at which the prices fall. There is strong cyclicality inherent to the system, a bit like the old ag. economics model of the cobweb.
That said, the length of the cycle is variable. Continued restraint might be in the best interests of the majority for a while longer. But each faces their own unique circumstances. Iraq, obviously. And the Saudis have some serious budget pressures. And Iran is presumed to have a political agenda that transcends short-term oil revenues.
The quoted comments of OPEC officials in the Stratfor article imply that they can fine tune the system -- they know the supply curve and the demand curve accurately. If so, they have a source of data no one else in the world has. Remember the fiasco late '98 and early '99 with the crude oil inventory figures?
Personally I hope that 2000 sees an average price over $20. That would be enough for a healthy dose of profits for the N. American industry, and repair some of the damage from the last two years. But if that happens, then the stage is really set for another downswing in '01 or '02.
JMO, BWDIKA |
