OPEC’s empty toolkit

The leaders of OPEC says its members have plenty of oil to meet demand. So why aren’t they putting more on the market?

…The scary thought – held by observers like peak oil guru Matt Simmons and commodities investor Jim Rogers – is that the cartel can’t do much more than that because the easy oil is already out of the ground.

“They’ve been telling us for years that they have between two and three million barrels of [daily] spare capacity,” says Gal Luft, the executive director of the Institute for the Analysis of Global Security. “If you have it and you don’t use it then you are deliberately denying liquidity to the market when it needs it. If they have it, why don’t they use it? And if they don’t have it, we need to know that. We need to put more oil in our strategic reserve.”


OPEC has apparently given its members the green light to pump all they want, according to a survey released by energy news service Platts last month. The Platts press release about the survey says that “OPEC has a ‘tacit’ understanding that those members capable of boosting crude production should supply as much oil as world oil markets needed.”

In other words, the leaders of OPEC are trying to regain control of oil prices and offer relief to their agitated customers, although Platts Global Director of Oil John Kingston sounded skeptical about how successful OPEC could be. “It’s clear that with non-OPEC output continuing to sag, and world demand staying flat regardless of high prices, that any additional supply most likely must come from OPEC,” he is quoted as saying. “But…its ability to put much more oil on the market looks severely constrained.”

Fortune