January 14, 2007

NOT GIVING IT AWAY...YET...:

Analysts loath to affirm oil turnaround (AP, Jan 14, 2007)

Some analysts are predicting prices may extend their drop to US$40 a barrel, a price not seen since 2004. The energy market has had a hard time maintaining rebounds lately, despite several factors that have given prices a boost in the past: The possibility of another OPEC cut, tensions in the Middle East are high, global energy demand is growing, and violence in Nigeria has escalated.

Attempts to rally this year have been rebuffed by persistent mild weather in parts of the US, Europe and Asia that consume heating oil; a number of investment funds taking short positions, or bets that prices will fall; and skepticism that OPEC is carrying out the production cuts it has promised. [...]

"The cohesiveness that OPEC used to enjoy is somewhat unwinding," said James Cordier, president of Liberty Trading Group in Tampa, Florida, adding that based on various reports it appears that while some nations such as Saudi Arabia are complying with cuts, others including Venezuela haven't been so diligent.

"Let's face it -- some OPEC producers produce oil for US$10 a barrel. So it's not like they're giving it away if it's at US$52," Cordier said, noting that he estimates OPEC has only delivered on about half of its promised reductions.

Posted by Orrin Judd at January 14, 2007 7:05 AM
Comments

Although I am loath to admit it - I think a gas tax would be a good idea. However, I say so because I think the tax wouldn't increase the cost of gasoline, but rather would come from OPEC's profit margins.

Greg Mankiw has been arguing this nicely for awhile (e.g., his paragraph on tax incidence).

A gas tax like that is just the sort of thing for a lame-duck president to take on. I suspect Pelosi would let pass gas taxes, and W could take the heat.

Posted by: Mike Beversluis at January 14, 2007 12:52 PM
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