The OPEC stage show !!

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OctoberLandon's picture
OctoberLandon
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The OPEC stage show !!

I don't want to sound like a conspiracy theorist, but does anyone else believe that this entire OPEC meeting yesterday was nothing more than a "stage show" to mask the fact that most OPEC memebers, including Saudi Arabia, are lacking spare capacity?  If you believe that this "disagreement" was genuine, please set forth your case - I would like to hear it.

ewilkerson's picture
ewilkerson
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Posts: 390
I agree.

I agree.

Chucks688's picture
Chucks688
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Both sides of this...

We know, or at least we should know, that the Kingdom of Saudi Arabia (KSA) has supply issues.  They doubled the number of wells a few years ago and recently ordered another set of wells to increase their total number by 1/3.  They haven't materially changed production in a while, despite their announcements to ramp up production.

Iran and Saudi Arabia are also essentially in the middle of a proxy war.  Bahrain being the central stage, but it is felt in other parts of the region.  It's subtle for the moment, it's holy and it will probably not end well.  MENA is a mess and it's not likely to fix itself anytime soon.  When you have that kind of chaos going on, you are going to have power struggles.  Remember that Ahmadinejad is also facing his own power struggle internally in Iran.  So the guy who was the Phys Ed. Minister last week is not the Iranian Oil Minister and since Iran heads OPEC this year, he's the head of OPEC?  You can't make that stuff up, but it's the kind of subtle slaps that happen in that part of the world.

Just my $.02

Macs's picture
Macs
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OPEC - SNAFU

I agree there's a whiff of the fish docks about this, but I'm not 100% behind the particular conspiracy you allude to, as I can't see all the players involved wanting to, or being able to, sing from the same hymn-sheet.

 

According to the BBC: "Those who blocked the increase in production included Venezuela, Iran, Algeria and Libya." Now there's a list of names to get the leaders of the West all frothing at the mouth (and I wonder who's sitting in the Libyan chair now, Qaddafi or the rebels???) And in the 'blue corner' it's mostly the Gulf States. Knowing that the 'Axis of Evil' in the 'red corner' hold their own position of wanting to maximise the price and eke out supplies, it gives the blue team a perfect opportunity to say ' we want to ramp up, we can ramp up, but those reds won't let us'. It's a good foil for them to not have to put those assertions about production to the test.

 

I've been thinking for a couple of years now (thanks to input from the likes of Matt Simmonds) that Saudi has peaked and CAN'T ramp up. Often as not they 'decide' not to ramp up. This time they have the cover, so they can pretend to want to again without being called on it. For my money, once they are forced to admit they can't, then it's game over for the al-Saud family. The only thing (barely) keeping the lid on 'the Saudi street' is the oil dole. That's reducing year on year, yet the population - especially unemployed young males - is rising unsustainably. Any admission  that they can't pump more will ignite the powder keg, repressive policing notwithstanding. If you think MENA is chaotic now, just imagine what it would become if the al-Sauds were deposed!

 

So, yes, overall I agree OPEC are lacking spare capacity, but I don't buy that the situation has been stage managed in quite the way suggested and do believe there is serious conflict within its ranks, especially given Chuck's point about Saudi/Iran proxy war.

 

My 2p ;-)

OctoberLandon's picture
OctoberLandon
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Posts: 23
The Meltdown Begins

That's a good point!  As oil production starts the declining, the NEMA states will start falling apart - thus hastening the collapse of oil production from OPEC. This will probably require the intervention of the West. I don't see a happy way out of this. :-(

Johnny Oxygen's picture
Johnny Oxygen
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Posts: 1443
And this point should be made

Saudis to build 16 Nuclear Reactors

 

http://www.peakprosperity.com/forum/saudi-build-16-nuclear-reactors-repo...

 

Why would they need 16 reactors if their oil supply was as good as they say it is?

JohnDoe2b's picture
JohnDoe2b
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Posts: 9
Many curious possibilities

It is possible that the Saudis recognize that they (and the world) are starting to run out of oil and they believe that nuclear is and will be the low cost option. It's also possible that they want to keep up with rival Iran and at least have the same threat of WMD as it does. What is interesting is that they are ignoring solar power as a serious alternative, presumably on economic grounds. If solar power is not feasible in Saudi Arabia, where can it be feasible ?

Johnny Oxygen's picture
Johnny Oxygen
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Posts: 1443
Re: Many curious possibilities

Hi JohnDoe2b

Welcome to CM!

Good thoughts. Thanks

Chucks688's picture
Chucks688
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Posts: 23
Just a thought, but...

Just a thought, but I'm converting the paper and linen products known as Federal Reserve Notes into hard assets as quickly as possible.  If you were KSA, wouldn't you be doing the same????  The points about the amount of power and the potential to at least bluff weapons capability in the future are noteworthy as well.

OctoberLandon's picture
OctoberLandon
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Posts: 23
Staging

I think the reason I initially suspected that this meeting was at least partially staged was the fact that this was the first OPEC meeting that completely "fell apart".  How would Saudi Arabi know the Iran and the others would hold their ground on not raising production unless they conferred with them first?

The Saudis need to put on their game face, becuase their prince was just on Squawk Box on CNBC recently touting they have full capacity up to 12mbpd. He also claimed they are currently working on expanding production capability to 15mbpd. This "capability" has not been demonstrated to the world yet, but the press takes all of this at face value and often quotes the Saudis spare capacity while reporting. Unbelieveble!

 

ewilkerson's picture
ewilkerson
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Posts: 390
I'll believe it when I see

I'll believe it when I see it.  They remind me of thetobacco companies and their consistent lies.

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