OPEC

All eyes on OPEC

Have you been enjoying the recent weeks of decreased gasoline prices?  The continued uncertainty regarding the world’s economic recovery coupled with increased production has propagated the trend of decreasing crude oil prices, which has translated into many happy (or at least less grumpy) drivers.  How long will this trend last?  Well, that depends on who you ask.  Some analysts believe that the trend for lower prices will continue, at least for a short while, as production will continue to outstrip demand while the world economy sputters along (See: Future Direction of Oil Prices May See Major Shift).

Others, however, point to recent rumblings from members of the Organization of Petroleum Exporting Countries (OPEC) that prices have already dropped too low.  OPEC holds its annual meeting tomorrow.  Rumors abound as to whether the group will expand, cut, or leave production at its current level  (See: Oil hovers above $83 as traders eye OPEC meeting).  What it decides will have much to say about where oil prices go in the near future.  It appears that OPEC will leave production levels where they are – despite complaints from Libya and Iraq that prices have fallen too low, and suggestions from Saudi Arabia that prices need to go even lower to held kick-start the global economy.  This does not necessarily mean that prices will stay consistent, however.  As I mentioned earlier, production levels right now exceed demand and according to Adam Smith, that means prices will continue to descend.

OPEC certainly does not wield the clout that it did in the past few decades but it still has the ability to affect the market substantially.  We should all watch the meeting tomorrow carefully if we want to know what our gas budget will be for the summer driving season.

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