OPEC has managed to shoot itself in its feet with a new string of “ enlightening ” statements.Just some time back OPEC, president Chakib Khelil had found biofuel use as contributing to rising oil prices in addition to “ geopolitical worries ”( rational behind this is anybody’s guess ! ). Now,with the recent easing in oil prices , the windfall profits being raked in by OPEC have taken a significant hit. Nobody likes less money , certainly not the rich ! And thus OPEC has highlighted that the market is seeing an excess of oil supply , an estimated million extra barrels a day, that is actually pushing down the prices. Thus in order to remove this surplus oil , OPEC wants to cut down production. This in turn would effectively mean that the prices may not come down any further .
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OPEC Says Excess Oil In Market
Srikant Rajan -
Costly Oil ? Biofuel To Blame Says OPEC
Srikant RajanOil price increase has been linked to numerous reasons ; speculation and increased demand being the most common. The reason being these are easy to construct , subjective and to a certain extent non verifiable . However OPEC seems to think otherwise . OPEC, president Chakib Khelil has now found ethanol to be the reason for almost 40 % increase in oil prices. The remaining 60 % is apparently due to rising dollar and an essentially vague factor – “ geopolitical worries “ ( fancy word for plain speculation ). How Mr.Khelil has arrive on this conclusion is anybody’s guess as he refuses to explain the logic behind such rationalization
Biofuels have been on the receiving side of criticism (sometimes fair !) for reduced food grain output. However the technology has been slowly maturing with the development of second generation and algae based biofuel. OPEC is undoubtedly worried as ethanol is a direct competitor to oil and also makes oil supplies “ stretch “ significantly ( bended fuels). OPEC’s attack, in my opinion signifies that this industry is definitely on the road to commercialization.
