The oil markets responded to the less-than-expected impact of Hurricane Gustav by touching off a selling spree, driving the price of oil to a new low in recent months. After losing $10 per barrel in a day, oil finally stabilized at $106 per barrel. OPEC may start adjusting its production to keep the price firm at $100:
OPEC meets in a week to consider their market position. If they want to defend the $100 per barrel limit, they will have to cut production. This will create a false shortage on the market which will cost them money in the short run, but preserve their assets for longer-term pricing. That will push prices at the pump higher, or at least keep them at current levels for a longer period than American consumers may have expected.
At the moment, because we import so much of our oil, we remain at the mercy of OPEC. The only way to break that reliance is to massively produce our energy independent of foreign oil, or at least as independent as we can make ourselves. The more we add our own resources, the less money we send abroad, the more jobs we create here, and the weaker OPEC gets. They can only play with the market as long as they control it; with the US mostly out of the global market, OPEC might collapse as its members abandon the cartel and fend for themselves instead.
When will we finally begin to take responsibility for our own needs and keep our money in the US?
Another key problem is a global economic slowdown. That may have been caused in part by the rapid rise in oil prices earlier, but now even supposed powerhouses like China and India will cut back on power production in coming months. The US demand will decrease with the end of summer, and won’t increase unless we have an especially cold winter.Oil prices fell below $106 a barrel Tuesday in Asia — $10 below its close Friday before the Labor Day weekend — as investors shifted their focus to slowing global demand after worries about Hurricane Gustav subsided.
Light, sweet crude for October delivery was trading at $106.03 a barrel in electronic trading on the New York Mercantile Exchange midafternoon in Singapore, and at one point dropped as low as $105.46.
On Monday, when U.S. trading was closed for Labor Day, the contract had plunged $4.34 to $111.12 a barrel in late electronic trading. On Friday, the contract settled at $115.46 a barrel.
Traders were relieved that Gustav weakened as it approached the offshore oil rigs and Louisiana refineries, and appeared to have caused less damage than expected in New Orleans and surrounding areas.
OPEC meets in a week to consider their market position. If they want to defend the $100 per barrel limit, they will have to cut production. This will create a false shortage on the market which will cost them money in the short run, but preserve their assets for longer-term pricing. That will push prices at the pump higher, or at least keep them at current levels for a longer period than American consumers may have expected.
At the moment, because we import so much of our oil, we remain at the mercy of OPEC. The only way to break that reliance is to massively produce our energy independent of foreign oil, or at least as independent as we can make ourselves. The more we add our own resources, the less money we send abroad, the more jobs we create here, and the weaker OPEC gets. They can only play with the market as long as they control it; with the US mostly out of the global market, OPEC might collapse as its members abandon the cartel and fend for themselves instead.
When will we finally begin to take responsibility for our own needs and keep our money in the US?
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