Oil Talk
Again US President asked for oil production increase to Saudi Arabia and again they refused to increase substantial amount, but agreed to increase oil production by 300,000 barrel per day by June, which is, insufficient to cool off skyrocketing oil price. Here is detailed news. There are conflicting reports regarding this increase, some media(mainly US) reported that this increase mainly because of Bush's request, some media reported that they made the decision well before Bush's visit. Again today OPEC member Qatar said there is no need of OPEC emergency meeting because oil price is balanced.
Why OPEC don't want to increase oil production? Oil is under earth like water, why they don't want to cash in all free resource now? Now price is peak and if they pump all available resource now, they can make lot of cash. If OPEC agreed to increase production by lets say 3,000,000 barrels per day, I don't think price would go down $50 per barrel, because of high demand. This is good analysis to answer all these questions. Saudis don't want to push themselves or other OPEC members to increase oil production because they had bad experience of increased oil production and price fell almost 50% during 1990s.
But now situation is different and they simply missing the opportunity of cash in. What will happen if oil price goes high day by day, US try to explore more drilling and use alternative energy to satisfy their needs. India and China people would think twice to drive car because of high oil price and particularly India already has massive public transport in place, hence demand would go down. OPEC will miss the golden opportunity of selling their oil at high price, that is freely available now. Here is chart from http://education.yahoo.com/reference/factbook/countrycompare/oil/1a.html
if we see oil consumption of these 3 countries is almost 27 million barrels per day and there is lot of chances that US would cut down import because untapped resources in Alaska, all they need to do is persuade green concerned people.
Why OPEC don't want to increase oil production? Oil is under earth like water, why they don't want to cash in all free resource now? Now price is peak and if they pump all available resource now, they can make lot of cash. If OPEC agreed to increase production by lets say 3,000,000 barrels per day, I don't think price would go down $50 per barrel, because of high demand. This is good analysis to answer all these questions. Saudis don't want to push themselves or other OPEC members to increase oil production because they had bad experience of increased oil production and price fell almost 50% during 1990s.
But now situation is different and they simply missing the opportunity of cash in. What will happen if oil price goes high day by day, US try to explore more drilling and use alternative energy to satisfy their needs. India and China people would think twice to drive car because of high oil price and particularly India already has massive public transport in place, hence demand would go down. OPEC will miss the golden opportunity of selling their oil at high price, that is freely available now. Here is chart from http://education.yahoo.com/reference/factbook/countrycompare/oil/1a.html
if we see oil consumption of these 3 countries is almost 27 million barrels per day and there is lot of chances that US would cut down import because untapped resources in Alaska, all they need to do is persuade green concerned people.
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