OPEC Blames US For High Oil
Using its nice, light touch, OPEC tried to push the cause of high oil prices onto the US government.
According to The Wall Street Journal “Ministers from the Organization of Petroleum Exporting Countries, meeting in Vienna, blamed surging oil prices on the weak U.S. dollar and “mismanagement” of the U.S. economy.” The weak dollar part may have some truth but the mismanagement argument is a bit tougher to understand.
It is very hard to see how a housing crisis which may match anything since the Great Depression and high gas prices are pushing up demand for oil. In the scales of things, with OPEC keeping production flat, the cartel would have to argue that Americans want to use more oil. As citizens here abandon their homes and leave their cars on the side of the road because they cannot make the note, the logic falls apart.
OPEC still defends its viewpoint that a slowing economy will eventually bring down demand. The underwriting of gas and diesel prices in China and surging demand in developing countries, including the those of the oil producers themselves, make the argument laughable.
Over time, the impact of the weak dollar should be washed out of the system by the dynamics of supply and demand. One piece of evidence for that is the likelihood that oil prices would fall sharply if OPEC announced even a modest increase in the number of barrels it would pump. It is not hard to prove. All they have to do is give it a try.
Douglas A. McIntyre