OPEC Has a Big Problem

The dropping demand and price for oil has created a major problem for OPEC (and other oil producers) with no real easy way out.

Members of the Organization of the Petroleum Exporting Countries saw fit to schedule an "extraordinary" meeting this Friday after seeing oil prices drop more than 50% in three months.

That constitutes an emergency to them, just like the weakening global economy is to the rest of us.

"It's about a snowball running downhill, and turning into an avalanche," said Anthony Sabino, a professor of law at St. John's University, whose legal practice includes oil and gas law. "Per-barrel price is cascading downward and only gaining momentum.

The problem for the oil producers is that their economies are generally based on the assumption of $100 or thereabouts for a barrel of oil. If they cut back on production to cut supply and force up price, they further weaken the economies of their major customers. They also create the incentive for further domestic oil exploration and development of alternative fuels. If that happens, it could be show over for OPEC and friends.

And cut they will -- at least that's what everyone predicts. No one expects the cartel to not act at a meeting members rushed to organize. But "how do they stretch the longevity of high prices, by keeping prices low enough [so] as not [to] push the world towards quickly developing alternatives and [keep] prices high enough to not damage production?" said Thomas Hartmann, an analyst at Altavest Worldwide Trading.

You could be seeing the beginning of the end for OPEC as we know it. Also, bear in mind that Venezuela has major financial commitments that require a high income from oil to meet. The dropping demand for oil world wide is putting all these producers in the trick bag, all of them chasing a shrinking market share and dropping revenues.

I predict that OPEC will announce a drop in production but will have a hard time making that stick. Chavez will make some more stupid comments about the U.S. but will try to sell every barrel of oil he possibly can.

The dropping price for oil and gasoline at the pump will go a long way to get the US out of the recessionary drift.

U.S. By Far Biggest Contributor to World Food Program, Oil-Rich Gulf States Give Almost Nothing

We're always reading how much everyone hates the United States and we're constantly told by the UN that we just don't do enough.

Well, this report should put to rest any notion we don't contribute enough of our largesse to help the needy.

Meanwhile, the fat-cat Arabs states spend more money on hate-preaching madrassas than to do to help feed the world's poor.

What a shocker.

United Nations Secretary-General Ban Ki-moon and his top lieutenants on Monday are convening the first meeting of the U.N.’s Task Force on the Global Food Crisis. Ban says it will “study the root causes of the crisis,” and propose solutions for “coordinated global action” at a summit of world leaders in June.

Ban might want to consider convincing the oil-rich nations of the Middle East to provide more than the near-invisible amount of money they currently give to the World Food Program (WFP), the U.N.’s food-giving arm, which is charged with alleviating the food crisis.

WFP internal documents show that the major oil producing nations of the Organization of Petroleum Exporting Countries (OPEC) gives almost nothing to the food organization, even as skyrocketing oil prices and swollen oil revenues contribute to the very crisis that the U.N. claims could soon add 100 million more people to the world’s starving masses.

The overwhelming bulk of the burden in feeding the world’s starving poor remains with the United States and a small group of other predominately Western nations, a situation that the WFP has done little so far to change, even as it has asked for another $775 million in donations to ease the crisis.

Donor listings on WFP’s website show that this year, as in every year since 1999, the U.S. is far and away the biggest aid provider to WFP. Since 2001, U.S. donations to the food agency have averaged more than $1.16 billion annually — or more than five times as much as the next biggest donor, the European Commission.

Our friends the Saudis have apparently misplaced their wallets.

On the other hand, Saudi Arabia, with oil revenues last year of $164 billion, does not even appear on the website donor list for 2008.

Isn't that special?

And while Canada, Australia, Western Europe and Japan have hastened to pony up an additional $260 million in aid since WFP’s latest appeal, the world organization told FOX News, the Organization of Petroleum Exporting Countries (OPEC), the international oil cartel, tossed in a grand total of $1.5 million in addition to the $50,000 it had previously donated.

The OPEC total amounts to roughly one minute and 10 seconds worth of the organization’s estimated $674 billion in annual oil revenues in 2007 — revenues that will be vastly exceeded in 2008 with the continuing spiral in world oil prices.

The only other major oil exporter who made the WFP list of 2008 donors was the United Arab Emirates, which kicked in $50,000. UAE oil revenues in 2007 were $63 billion.

What a bunch of lowlifes. These parasites probably spend more money on hookers than they do to help feed the poor.

Here's the donor list.

Hugo Chavez Certifiably Insane

The gift that keeps on giving, Hugo Chavez, has come out with another beauty to certify that he is insane.

Chavez calls for cheap oil plan

Venezuelan leader Hugo Chavez has called on oil-rich nations to dramatically reduce what they charge poor countries for the commodity.
The poorest countries should only pay about $20 (£9.60) for a barrel of oil compared with current market prices of more than $90, Mr Chavez said.

And, of course, the socialist/MSM/left-wing (but I repeat myself) dream of wealth redistribution comes up.

The Venezuelan leader said OPEC members should discuss preferential pricing at their upcoming meeting in Saudi Arabia on Saturday, describing such a policy as a "marvellous mechanism of redistribution of the world's wealth."

"I would sell oil to a rich country at $100 and to a poor country perhaps at $20," he said.

Here's how this would actually work in the real world.

If you take an item the market values at $100 a barrel and sell it at an artificially low price of $20 a barrel to a certain group of customers, those customers will then turn around and resell it at the market $100 price and pocket the $80 profit themselves.

So the reality is, the product will end up being sold at $100 a barrel; it's just a matter of who pocket the money. If Chavez is so worried about these poor countries, he should just write them a check and be done with it.

Socialists never quite grasp the reality that they can not rig the market value of an item.

Meanwhile, the crackpot communist is now threatening King Juan Carlos of Spain, demanding an apology after the King rightly told him to shut up.

Venezuelan President Hugo Chavez demanded on Tuesday Spain's king apologize for telling him to shut up, warning that Spanish investments could suffer in its former colony because of the spat.

Chavez, who railed against imperialism and capitalism, named banks Santander and BBVA as possible targets, saying the OPEC nation did not need Spanish business.

"The king lost it," Chavez said at a late-night political rally. "He should say, '... I, the king, confess, I was beside myself, I made a mistake.'"

Like I said, he's certifiable.

Gas Prices and the Refinery Dilemma

Refining woes, not crude, driving US fuel prices

NEW YORK (Reuters) - Record fuel prices in the midst of a U.S. oil supply glut have underscored the growing failure of domestic refiners to keep up with demand in the world's biggest energy consumer.

A crunch in spare refining capacity has left the United States vulnerable to supply disruptions from refinery accidents -- on the rise because of lingering damage from hurricanes and tough environmental regulations -- and bolstered the argument by oil cartel OPEC for keeping supply curbs in place.

As I point out repeatedly, the U.S. consumption of gasoline outgrew our capacity to refine it over 10 years ago. So there is a very thin supply margin. We bridge the gap by importing more and more refined gasoline from Europe. The future does not look very rosy either.

Refiners are also struggling to meet new greener U.S. specifications that require highly specialized processors to make fuel, analysts said.

"Having less latitude with very tight product specifications means that process glitches that would have been resolved without much trouble in the past, are causing big production losses," Jan Stuart, economist for UBS Securities LLC, said in a research note.

While no new refinery has been built in the United States since 1976, industry groups say companies have added the equivalent of a new refinery in additional capacity to existing U.S. plants each year for more than a decade.

But they warn that new U.S. government efforts to cut gasoline use by 20 percent by 2017 using renewable fuels may cause companies to scrap future expansion plans despite historic profits in recent years, tightening the refining market further."

You would not be very eager to invest hundreds of million so dollars in new refineries if the government was passing legislation to cut the consumption of your product, either.

Talk about your paradox of unintended consequences.