Goldman Sachs (GS) had forecast that oil might hit $100 in 2009. Now the bank is saying that number could be reached this year. According to a report by Bloomberg, a decline in inventory and OPEC’s refusal to raise output could drive crude North.
Bloomberg writes that Goldman’s case is simple: "New disruptions of Nigerian or Iraqi supplies, or any military strike against Iran, might trigger the rise."
But, not so fast. OPEC is suffering currency exchange problems. The falling dollar is eroding OPEC’s profits on oil. The cartels purchasing power has dropped by a third and that means that the value of a barrel of oil has stayed around $43 for OPEC, the same as it was last year.
So, the oil producing countries have two options. Keep oil tight, and move the price up. This could increase their purchasing power, if the dollar holds steady. Or, they could increase supply and hope to make up some of their income on volume.
It makes the oil price even more of a crap shoot.
Douglas A. McIntyre
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