What should OPEC do?

[UndercoverElephant]

OPEC has been told by the US that it MUST sell its oil in dollars.
The US economy is in trouble, and the US is currently printing dollars at a rapid rate, which is causing inflation of the dollar, and making it increasingly worthless against other currencies.

So what should OPEC do in order to keep its revenues at the same level as they would have been if the dollar had remained at the value it was 2 years ago and the oil price was the value it was 2 years ago?


(1) Cut output to force the dollar price of oil upwards at the same rate the dollar slides downwards?

This is what they are actually doing.

(2) Sell oil in euros rather than dollars?

This would mean that the dollar would stop being the worlds de facto reserve currency. It would mean that as the dollar fell, the price of oil would automatically rise at the same rate the dollar falls, rather than OPEC having to control it with output cuts.

(3) Increase production so the dollar price of oil goes back down to $25, even though this means the price of oil would have effectively gone down by the same rate the dollar has fallen?

If you are going to select (3), please explain why you think OPEC would/should accept a cut in the real price of oil at a time when supply is peaking and demand is rapidly increasing? Wouldn't this be blatantly against their own best interest?

I see no other options.

 

[richardm]

There is a fourth option; do nothing.

What's the US going to do about it? They can't force OPEC to do anything they don't want to do.

 

[UndercoverElephant]

There is a fourth option; do nothing.

What's the US going to do about it?

Did you have trouble reading the question?

I said "What should OPEC do?" **NOT** "What should the US do about OPEC?"

They can't force OPEC to do anything they don't want to do. [/B]

Of course they can't. Can't you read?

There is no "fourth option" for OPEC, because I already included what they are currently doing and both possible alternative courses of action they could take.

If you can think of a fourth option FOR OPEC, then please tell me what it is.

 

[UndercoverElephant]

http://www.axisoflogic.com/artman/publish/article_6140.shtml

'George Bush's fiscal finger of fate inflates gas prices'

Gasoline and heating oil prices in the U.S. are at an all-time high and rising. But it may surprise Americans to learn that in Europe, they've essentially remained steady. Because oil is oil wherever it's used, why the cost difference?

Experts have a lot of good reasons to explain why prices are going up at the moment: unrest in the Middle East, gas-guzzling cars and greed among the oil producing nations, among others. But there is another culprit that is being ignored and that is making the problem far, far worse in the U.S. than elsewhere: the decline in the value of the dollar.

Between the end of February 2002 and the end of February 2004, the price of oil in dollars rose by 51% (from $20 a barrel in 2002 to more than $35 a barrel today), but it rose by only 4% in euros. Over the same two-year period, the value of the dollar plunged from 1.16 euros per dollar to 0.80 euros per dollar. In this situation, it is perfectly rational for foreign suppliers of oil to charge more in dollars to make up for the falling value of our currency.

 

[Darat]

...snip...

Of course they can't. Can't you read?


...snip...

Then why do you say that the USA is able to tell OPEC that it MUST sell in dollars?


(edited for you)

 

[richardm]

Did you have trouble reading the question?

I said "What should OPEC do?" **NOT** "What should the US do about OPEC?"

Of course they can't. Can't you read?

There is no "fourth option" for OPEC, because I already included what they are currently doing and both possible alternative courses of action they could take.

If you can think of a fourth option FOR OPEC, then please tell me what it is.

Do you always have this much trouble with social interaction, or do you make an exception for the internet?

 

[UndercoverElephant]

Do you always have this much trouble with social interaction, or do you make an exception for the internet?

Depends when I run up against supposedly intelligent people who cannot read a simple question.

I call a spade a spade. At this site, that is allowed.

 

[UndercoverElephant]

Then why do you say that the USA is able to tell OPEC that it MUST sell in dollars?


(edited for you)

Obviously theoretically OPEC can sell its oil in Indian Rupees if it wants to. But in reality there are political pressures in place. The US has made it clear to OPEC that if it even thinks about selling oil in Euros that all hell will break loose. If they were to do this it would spell the end of the post-1945 period were the worlds only reserve currency was the dollar, and would rapidly accelerate the collapse of the US economy. The Saudis know this.

So long as the dollar was stable it was possible for the US to tell OPEC that it "MUST" sell oil in dollars. The US is still trying to tell OPEC that it "MUST" sell oil in dollars, but it is losing the political-economic clout to make the "MUST" stick. So the Saudis are forcing the dollar price upwards instead of selling the oil in Euros. They are saying that "we do not want to see these high oil prices", but this is just political cover. They actually want to see the price go higher.

I am asking what you would do if you were OPEC.

 

[c0rbin]

Are you the Undercover Elephant?

 

[UndercoverElephant]

Are you the Undercover Elephant?

Shhhh!

 

[Kodiak]

OPEC should act in its own best interests.

That said....

How the U.S. views their decisions should be a serious consideration for them...

 

[Darat]

OPEC should act in its own best interests.

That said....

How the U.S. views their decisions should be a serious consideration for them...

I agree with you and I think that is what they have been doing.

I doubt the reason why the OPEC countries are trading in dollars is simply because they are being told to do so by the USA.

It seems more likely to me that since the USA is such an important consumer of oil the worse thing for the OPEC countries would be a crash in the dollar or the USA economy, because that in the end would hurt OPEC more.

 

[Graham]

Shhhh!

Just out of interest, are you also Malachi151?

 

[Graham]

I agree with you and I think that is what they have been doing.

I doubt the reason why the OPEC countries are trading in dollars is simply because they are being told to do so by the USA.

It seems more likely to me that since the USA is such an important consumer of oil the worse thing for the OPEC countries would be a crash in the dollar or the USA economy, because that in the end would hurt OPEC more.

Isn't that why they want to change to Euros - because they view it as more likely to remain stable in the immediate future?

Graham

 

[Drooper]

Obviously theoretically OPEC can sell its oil in Indian Rupees if it wants to. But in reality there are political pressures in place. The US has made it clear to OPEC that if it even thinks about selling oil in Euros that all hell will break loose. If they were to do this it would spell the end of the post-1945 period were the worlds only reserve currency was the dollar, and would rapidly accelerate the collapse of the US economy. The Saudis know this.

So long as the dollar was stable it was possible for the US to tell OPEC that it "MUST" sell oil in dollars. The US is still trying to tell OPEC that it "MUST" sell oil in dollars, but it is losing the political-economic clout to make the "MUST" stick.

Thee is a highly technical economic phrase for these couple of paragraphs:

"a complete crock of ◊◊◊◊!

 

[UndercoverElephant]

OPEC should act in its own best interests.

That said....

How the U.S. views their decisions should be a serious consideration for them...

Well, that is exactly what is happening. If they really didn't care what the US thinks then they would just be selling oil in Euros, end of story. Instead, they are still selling oil in dollars, and keeping up pretending they want to get the dollar price back down to $25, even though they are cutting supplies for the supposed reason of "preventing a glut." Actions speak louder than words, but they are at least saying what the US wants them to say.

 

[UndercoverElephant]

I agree with you and I think that is what they have been doing.

I doubt the reason why the OPEC countries are trading in dollars is simply because they are being told to do so by the USA.

It seems more likely to me that since the USA is such an important consumer of oil the worse thing for the OPEC countries would be a crash in the dollar or the USA economy, because that in the end would hurt OPEC more.

That isn't true. There is a massive increase in demand for oil in China and pretty much the rest of the world. OPEC isn't short of customers. If OPEC believes the US economy is collapsing anyway, then there is no point in them under-pricing oil to keep the US economy afloat for a few extra months (or rather to keep US gas prices down until the election). Do they want to see Bush re-elected? I doubt it.

Just out of interest, are you also Malachi151?

No.

 

[Drooper]

That isn't true. There is a massive increase in demand for oil in China and pretty much the rest of the world. OPEC isn't short of customers. If OPEC believes the US economy is collapsing anyway, then there is no point in them under-pricing oil to keep the US economy afloat for a few extra months (or rather to keep US gas prices down until the election). Do they want to see Bush re-elected? I doubt it.

FYI, this also comes under the designation:

"crock of ◊◊◊◊"

 

[UndercoverElephant]

Isn't that why they want to change to Euros - because they view it as more likely to remain stable in the immediate future?

Graham

They see it as more likely to remain stable in the medium and long-term future as well.

Americas economic problems are not short-term. The US has borrowed itself into a serious mess, is running a massive deficit, cannot compete with the rest of the world, is seriously dependent on cheap oil and has made no effort to change its economy to a post-oil configuration (unlike Europe, the US took no action on Kyoto).

Basically, the American economy is in a serious mess and the only way out of it will require an enormous restructuring of the whole world economy, with the US coming out of it with a seriously reduced standard of living. Only then will the US be able to compete with the rest of the world and balance its books.

While all that is happening, China and the EU will take over as the main engine of the world economy.

 

[UndercoverElephant]

Thee is a highly technical economic phrase for these couple of paragraphs:

"a complete crock of ◊◊◊◊!

Any chance you can actually explain WHY you think it is a "crock of ◊◊◊◊", Einstein?

It is very easy to post "Nah. That is a crock of ◊◊◊◊." Even George W Bush has the intellectual capacity to debate at this level. Can you do better, and actually say something relevant to the debate?

A highly technical response :

Why don't you go ◊◊◊◊ yourself?