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Countdown to ?100 oil (54): OPEC ready to dump dollar?

Jerome a Paris, European Tribune
It’s a good thing that Saudi Arabia is an old ally of the USA, because they are the last holdout against a freefall of the dollar. Oh, they’re not doing much to actually prevent that: they’re just refusing to talk about it

Saud Al-Faisal, the Saudi foreign affairs minister, warned the meeting: “The mere mention that Opec is studying the issue of the dollar is going to have an impact.” He said a reference to the US currency in the declaration could cause the dollar to “collapse”.

Opec frets over response to dollar

… OPEC members fretting about the dollar is understandable:

  • their own currencies are, for several of them, pegged to the dollar, which means increasing levels of inflation for them as they import almost everything they consume from the eurozone and other strong currency areas

  • their reserves are held, to a large extent, in US dollar and are losing value;
  • their recent forays into the happy world of equity investment, private funds investment and the like, in a quest for better returns, is being threatened by the chaos in the financial markets (cf the Saudi prince who is the first shareholder of Citigroup)

(18 November 2007)

Critics Assail Weak Dollar at OPEC Event

Jad Mouawad, New York Times
A rare meeting of the heads of state of the OPEC countries ended here today on a political note, with two leaders – President Hugo Chávez of Venezuela and President Mahmoud Ahmadinejad of Iran – blaming the weakness of the United States dollar for high oil prices.

Despite the best efforts of the host country, Saudi Arabia, to steer the meeting away from politics and promote OPEC’s environmental concerns, the leaders of Venezuela and Iran let loose some show-stealing statements.

“The dollar is in free fall, everyone should be worried about it,” Mr. Chávez told reporters here. “The fall of the dollar is not the fall of the dollar – it’s the fall of the American empire.”

During a news conference after the meeting, Mr. Ahmadinejad added: “The U.S. dollar has no economic value.”

… Normally, meetings of the Organization of the Petroleum Exporting Countries are tepid affairs where ministers leave politics at the door and talk about oil inventory and supply and demand.
(18 November 2007)

OPEC to study effect of dollar on prices

Sebastian Abbot, Associated Press
OPEC will study the weak U.S. dollar’s effect on the oil cartel’s earnings and investigate the possibility of a currency basket, Iran’s oil minister said Sunday.

“We have agreed to set up a committee consisting of oil and finance ministers from OPEC countries to study the impact of the dollar on oil prices,” Gholam Hussein Nozari told Dow Jones Newswires at a rare heads-of-state OPEC summit.
(18 November 2007)

OPEC members pin their future on price stability

David Ebner, Globe & Mail
Concern mounts within cartel that fluctuating cost could drive its biggest customers toward alternative fuels

Despite oil at nearly $100 (U.S.) a barrel, there was no celebration in the planet’s crude capital on the weekend as producers of 40 per cent of the world’s supplies gathered.

Instead, there was an air of tension underlying the pomp and circumstance of the event hosted by King Abdullah, absolute ruler of Saudi Arabia.

High oil prices, insisted the Organization of the Petroleum Exporting Countries, benefit no one. Price stability is what’s needed.

“The central role that petroleum plays in the economies of [OPEC] countries, as well as the world, makes petroleum market stability essential,” Abdalla el-Badri, OPEC secretary general, said yesterday in Riyadh.

Decoding OPEC’s message to the world: The longer oil remains erratic and expensive, the faster consumers of the fuel will start looking for alternatives.
(19 November 2007)

OPEC’s lost sway over oil prices

Dan Murphy, Christian Science Monitor
This weekend’s summit focused mostly on poor nations, climate change, and the euro vs. the dollar.

A rare meeting of the heads of state of the Organization of Petroleum Exporting Countries (OPEC) in Saudi Arabia this weekend was predictably focused on prices. But the price most often discussed wasn’t the cost of oil, but rather the plummeting US dollar.

As oil hovers near $100 a barrel, it’s causing global jitters. Some economists worry that price, which depending on whose math you use is either near or above an inflation-adjusted record, could push many world economies into recession.

But the organization that was created in 1960 to stabilize prices, today wields less clout than it once did over the cost of crude. The 13-nation cartel once controlled prices often by just talking about pumping more or less oil. But now its leaders say booming world demand – largely from India and China – and concern over a possible US attack on Iran are driving prices.
(19 November 2007)