Oil prices: OPEC’s high wire act

The cartel struggles to keep oil prices high, but not high enough to kill the economy. Long term, are they investing enough to meet worldwide demand?

NEW YORK (CNNMoney.com) — High oil prices are a drag on the economy, but OPEC isn’t likely to raise production at its special meeting next week. But experts say the cartel is on track to meet worldwide demand – and keep prices from rising further – in the long run.

In the short run, OPEC’s special meeting set for next Friday will be under the microscope to see how the cartel will address high oil prices amid a stalling economy in the United States.


But it’s a tough call for OPEC. They clearly don’t want high oil prices to kill the world economy since that would also cut demand for oil. But if production is increased and the economy stalls anyway, oil prices could collapse.

That’s exactly what happened in 1997, when OPEC boosted production at a fall meeting in Jakarta, only to have the Asian financial crisis erode demand for crude the next year. Analysts say the so-called “Ghost of Jakarta” still haunts OPEC thinking – between the end of 1997 and the end of 1998, crude prices went from $20 to $10 a barrel.

“The general sense is they are not going to do anything,” said Ann-Louise Hittle, an oil analyst with the energy consultants Wood Mackenzie. “With the economy being weak, prices could come down anyway.”

CNN