Essay Preview: Gas
Report this essay
OPECs big gamble
The cartel is set to cut 1 million barrels of production but that may actually force prices lower in the long run.
By Steve Hargreaves, CNNMoney.com staff writer
October 11 2006: 6:29 PM EDT
NEW YORK (CNNMoney.com) — If OPEC follows through on the talk that it will cut oil production by a million barrels a day, it will send a clear signal that the cartel feels the world can handle $60 oil.
But it could also undermine prices in the long run, energy experts said, by encouraging more conservation and investment in alternative energy.
Special Reportfull coverage
OPECs big gamble
Oil falls below $58
Big drop seen in winter heating bills
Weather knocks Prudhoe Bay offline
Energy matters
The joy of oil
The latest edition of Fortunes annual ranking of hot companies shows the power of petroleum –and vanity. (more)
Quit the gas price gripe
By some measures Americans are paying half of what they did in 1980. (more)
Beware the oil trap
Energy stocks are great long-term investments, but you should buy them very carefully. (more)
Bransons $3B fuel bet
Billionaire mogul says 100 percent of future proceeds from certain divisions of Virgin Group will go toward fighting global warming. (more)
Furthermore, the cut by OPEC could actually come back and haunt the cartel later since it gives the world more of a cushion against further output disruptions in the future.
Initially, news of the planned cut last week sent prices rising back above $60 a barrel.
But prices have fallen back since then, to below $58 Wednesday, as OPEC ministers bicker over exactly which nations should cut how much, and when they will do it.
Gallery: Best high mileage cars
But most analysts believe a cut is coming soon, and Qatars oil minister told Reuters Wednesday that “there is no objection” and that it could happen within the next two or three days.
Analysts had long predicted OPEC would cut production if crude oil sank into the $50s, especially since autumn is typically a season of low demand. The decline has come as economic growth has slowed and supplies swelled to levels above or well above average for this time of year.
Analysts said the biggest reason OPEC, which currently