#1
http://blogs.moneycentral.msn.com/topstocks/archive/2008/09/11/the-death-of-opec.aspx

"Saudi Arabia walked out on OPEC yesterday, saying it would not honor the cartel's production cut. It was tired of rants from Hugo Chavez of Venezuela and the well-dressed oil minister from Iran.

As the world's largest crude exporter, the kingdom in the desert took its ball and went home.

As the Saudis left the building, the message was shockingly clear. “Saudi Arabia will meet the market’s demand,” a senior OPEC delegate told the New York Times. “We will see what the market requires and we will not leave a customer without oil."

OPEC will still have lavish meetings and a nifty headquarters in Vienna, Austria, but the Saudis have made certain the the organization has lost its teeth. Even though the cartel argued that the sudden drop in crude was due to "oversupply", OPEC's most powerful member knows that the drop may only be temporary. Cold weather later this year could put pressure on prices. So could a decision by Russia that it wants to "punish" the U.S. and European Union for a time. That political battle is only at its beginning.

The downward pressure on oil got a second hand. Brazil has confirmed another huge oil deposit to add to one it discovered off-shore earlier this year. The first field uncovered by Petrobras has the promise of being one of the largest in the world. The breadth of that deposit has now expanded.

OPEC needs the Saudis to have any credibility in terms of pricing, supply, and the ongoing success of its bully pulpit. By failing to keep its most critical member, it forfeits its leverage.

OPEC has made no announcement about any possibility of dissolving, but the process is already over."
#2
Oh noes?
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#3
I'm really not sure what to think about this. Is this good or bad?
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#4
Quote by Funkbass796
I'm really not sure what to think about this. Is this good or bad?

Me neither, I don't know but "death of OPEC" might be a bit much.
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#5
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#6
Quote by darkstar2466
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Exactly what i was thinking
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#8
Sounds like the Saudi's gave a big middle finger to OPEC (The money grubbing thieves) Which is surprising since I always figured Saudi Arabia was behind most of the "oil shortages" (Yea ****ing right, there is no shortage as we continue to find larger and larger deposits. We're not Road Warriors yet people)

This could go either way. They could hike up prices or lower them, we'll just have to wait and see.
#9
No, this is a good thing. The OPEC is responsible for keeping gas prices up, and the Saudis, who are the main cause of that, are leaving the organization.
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#10
Quote by black007hawk2
No, this is a good thing. The OPEC is responsible for keeping gas prices up, and the Saudis, who are the main cause of that, are leaving the organization.

Finally someone figures it out. :P
#11
Quote by black007hawk2
No, this is a good thing. The OPEC is responsible for keeping gas prices up, and the Saudis, who are the main cause of that, are leaving the organization.


As the guy above you says, it could swing either way. I think we'll have stronger ties directly with the Saudis in the long run due to this.
Quote by denizenz
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#12
Surely this only creates competition between OPEC and Saudi wholesale, which leads to a drop in the rate of oil price increase? Is that not a good thin, or aminotdoinitrite?
#13
im from venezuela (yes we're getting more ****ed up every day)... let me explain:

OPEC (or OPEP in spanish) regulates the prices of oil so that all countries that are associated have a competitive chance of getting a piece of the market.

in other words... if this is true and theres no OPEC... youll wish the prices stayed at 4 dollars a galon
#14
Quote by just17n8
im from venezuela (yes we're getting more ****ed up every day)... let me explain:

OPEC (or OPEP in spanish) regulates the prices of oil so that all countries that are associated have a competitive chance of getting a piece of the market.

in other words... if this is true and theres no OPEC... youll wish the prices stayed at 4 dollars a galon



Erm... no. Completely wrong. OPEC sets quotas for each member countries production, thus, they in effect set the market price. If Saudi left because of the quotas, odds are they will increase production. If they supply what the market demands (as they have said they will) prices will fall.
#15
Quote by Funkbass796
I'm really not sure what to think about this. Is this good or bad?

i say good, OPEC is a cartel who's only aim is to maximize profit for it's members, and without Saudi Arabia, it looses a lot of power and control over prices
ie. supply and demand: Saudi's produce more oil-->more oil=more suply to meet demand-->prices drop
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#16
this is good... very good
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#17
Quote by iimjpii
Finally someone figures it out. :P


Lol, It was covered in my economics class yesterday
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#19
Quote by Kiwi Ace
I'm surprised it didn't happen earlier. The Saudis are clever enough to realise that as the world moves away from oil, high prices are no longer sustainable as the price elasticity of demand starts to increase.


It's never gonna reach anywhere near 1 though.

I think in the short-term it'll be a good thing as the market starts to receive more oil, but in the long-term it could be bad, leaving countries complacent about their needs to find alternative energy sources as their oil demands are met at good prices.

Also, increasing trade with the Saudis can't be a good thing.
Originally posted by TestForEcho
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#20
I'm not going to lie, I have no idea what the fŭck is going on.


OPEC sets quotas for the member countries, meaning it limits the supply of oil going into each country? So, now to meet all this demand they can drop prices to $1.40 a gallon if they want, and they can ship as much as they want, meaning people will be going ass-haticlly insane over the cheap oil, meaning we're going to burn through oil like there's no tomorrow?

That sounds bad. If my logic isn't flawed (90% chance it is)
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#21
Isn't this a good thing? Sounds like their mad at Iran and Venezuela, who are our main enemies.
#22
Quote by Davus
I'm not going to lie, I have no idea what the fŭck is going on.


OPEC sets quotas for the member countries, meaning it limits the supply of oil going into each country? So, now to meet all this demand they can drop prices to $1.40 a gallon if they want, and they can ship as much as they want, meaning people will be going ass-haticlly insane over the cheap oil, meaning we're going to burn through oil like there's no tomorrow?

That sounds bad. If my logic isn't flawed (90% chance it is)


No, you're right.
Originally posted by TestForEcho
Badreligionrock is the man.

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#23
Quote by Badreligionrock
It's never gonna reach anywhere near 1 though.

Well it will if America stop using it for electricity generation and we move to alternative methods of powering transportation.
Quote by Badreligionrock
I think in the short-term it'll be a good thing as the market starts to receive more oil, but in the long-term it could be bad, leaving countries complacent about their needs to find alternative energy sources as their oil demands are met at good prices.

I agree, but in the long run it is a very clever move from Saudi Arabia's perspective.
Quote by Badreligionrock
Also, increasing trade with the Saudis can't be a good thing.
What? Why?
Quote by Davus
I'm not going to lie, I have no idea what the fŭck is going on.


OPEC sets quotas for the member countries, meaning it limits the supply of oil going into each country? So, now to meet all this demand they can drop prices to $1.40 a gallon if they want, and they can ship as much as they want, meaning people will be going ass-haticlly insane over the cheap oil, meaning we're going to burn through oil like there's no tomorrow?

That sounds bad. If my logic isn't flawed (90% chance it is)

They could increase production but they don't want to. They can increase their revenue by restricting output which leads to a higher price, and that's exactly what they do. Saudi Arabia has decided to break the cartel because it thinks that restricting output to such a large extent is no longer profitable.
#24
Quote by Kiwi Ace

What? Why?


Just a touch of ignorance on my part
Originally posted by TestForEcho
Badreligionrock is the man.

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Badreligionrock you have the greatest avatar of all time. Rejected is the best video. Period.
#26
Quote by Kiwi Ace
Seriously, what's wrong with trading with Saudi Arabia?


Well I was just trying to make a wee joke, but it's a corrupt nation. I don't think it's right to have such a great dependance on one country for your oil when it treats its citizens like shit everyday.
Originally posted by TestForEcho
Badreligionrock is the man.

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Badreligionrock you have the greatest avatar of all time. Rejected is the best video. Period.
#27
Quote by Badreligionrock
Well I was just trying to make a wee joke, but it's a corrupt nation. I don't think it's right to have such a great dependance on one country for your oil when it treats its citizens like shit everyday.

Oh. I don't think it's corrupt per se, certainly there are huge human rights abuses there, however. That's not a reason not to trade though.
Edit: Our Prime Minister said that if New Zealand only traded with like minded countries we would be limited to trading with (it think it was) Sweden, Norway and Ireland. lol
#28
They could increase production but they don't want to. They can increase their revenue by restricting output which leads to a higher price, and that's exactly what they do. Saudi Arabia has decided to break the cartel because it thinks that restricting output to such a large extent is no longer profitable.

So, they're going to lower prices just a bit so they don't lose such a massive market?
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The sun has gone down and the moon has come up,
And long ago somebody left with the cup,
But he's driving and striving and hugging the turns...
#29
Quote by Kiwi Ace
Oh. I don't think it's corrupt per se, certainly there are huge human rights abuses there, however. That's not a reason not to trade though.


Yeah, it's more a political point and I don't really get involved in politics much.

It does come at a good time for the UK and US markets though. Maybe this'll stop the US going into recession once and for all.
Originally posted by TestForEcho
Badreligionrock is the man.

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Badreligionrock you have the greatest avatar of all time. Rejected is the best video. Period.
#30
Quote by Davus
So, they're going to lower prices just a bit so they don't lose such a massive market?

They don't control prices directly, they control output. Now that prices are falling OPEC want to cut output to try a force prices up again. However, (although this is only my guess) Saudi Arabia have realised that if the oil prices keep going up it gives the West more incentive to move away from oil, which would destroy their market altogether - therefore it's better for them to keep a good supply so that the West aren't scared away from using it. Or it could equally be that the Saudis are trying to undercut the cartel to increase their market share.
#31
Thank you, that cleared most of it up.
The arena is empty except for one man,
Still driving and striving as fast as he can.
The sun has gone down and the moon has come up,
And long ago somebody left with the cup,
But he's driving and striving and hugging the turns...
#32
Is it good? Is it bad? Well Opec definitely doesn't have as much leverage anymore. What they did before was agree to raise or lower (but mostly raise) prices. With the worlds biggest petroleum exporter out of Opec they wont be able to impact the world prices as much. Pretty much there is now competition in the market if we think of Opec as one company. Of course its also up to investors to decide the price and they may take this, combined with hurricane Ike, as an opportunity to raise the prices in the short run. But i think prices will continue to to fall in the future.

Why i think prices have been falling recently? US Presidential Elections. The Republicans sent a clear message to the Oil Company to ease of the money gouging for the time being so as to give McCain a better chance of winning. (yes, i know, very conspiracy theory-ish)
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#33
Quote by CaptainRon
Well I live in Canada and I have a feeling we aren't importing much Saudi oil.


Yes you would, you would import tonnes of it
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#34
Yeah sounds good to me to. I mean if all the oil exporters were united in one organization, OPEC, that obviously means no competition. So now Saudi Arabia leaving means that there is competition. Competitors don't see who can raise prices more, do they? The importers will buy the cheaper gas, plane and simple.

Maybe I'm over simplifying. But most of us do seem to think that it will help prices go down. I think that is a bad thing, though. We may be setting ourselves up, hastening a real oil shortage. Also, as has been said, less incentive to get off of oil like we should have done awhile ago. Sadly, the only way people will get behind new energy is if it helps to fatten their wallets. Ironically, they're the same people that accuse "big oil" for being money hungry monsters...
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#35
Quote by DZCunuck
Why i think prices have been falling recently? US Presidential Elections. The Republicans sent a clear message to the Oil Company to ease of the money gouging for the time being so as to give McCain a better chance of winning. (yes, i know, very conspiracy theory-ish)

It's not just the Republicans, its a common tactic for all politicians.
#36
Quote by DZCunuck

Why i think prices have been falling recently? US Presidential Elections. The Republicans sent a clear message to the Oil Company to ease of the money gouging for the time being so as to give McCain a better chance of winning. (yes, i know, very conspiracy theory-ish)

are you seriously going to go there?

/don't-go-thar-girl-fraynd


sounds like good news to me, but only time will tell.


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#37
http://www.iht.com/articles/ap/2008/09/03/business/LA-Brazil-OPEC.php
Iran invited Brazil to join OPEC
Quote by some other article
Brazil has ambitious plans to acquire refineries that may make its Petrobras the world's third-largest seller of gasoline and diesel and has embarked on a is on a $112.7 billion expansion, which may allow the country to overtake the output of all OPEC members except Saudi Arabia.

If they join OPEC would that be good or bad?