Posted by: Pradeep | September 9, 2008

Oil prices and OPEC

World is fortunate that last 2months have seen correction in the prices for most important commodity like oil. While prices moved from 10-20-40-80-100-150; OPEC maintained that it is nothing to do with demand / supply but rather because of speculator in the market. Agreed. They didn’t increased production as such; albeit twice they pleased their bosses by increasing little production levels.

Today OPEC is meeting to decide on future actions for controlling the fall in the prices…where the speculator theory has gone. Is this talk because OPEC countries are feeling the pinch of reducing revenues, falling stocks, increasing inflation? Is high prices for only commodity available with them is the solution they see in keeping themselves afloat? Isn’t this greed?

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Responses

  1. Interesting article. One of the things I have been concerned with is the strain that oil will put on the economic ”recovery.” Even though these one off situations like Egypt, Saudi Arabia, and Japan will have a short-term effect, the long-term trend is what I am most concerned about. What is interesting is that in several areas that have been hit hardest the following circumstances are all happening at once.

    In most of these areas (Phoenix, Las Vegas, Inland Empire) , housing prices have crashed, leading to underwater houses and eventually foreclosures. Unemployment has skyrocketed in these areas as well. Now that prices have fallen so far and inventory appears to some to be ripe for the picking, investors are purchasing properties for to rent for cash flow. However, as oil picks up, it is becoming clear that many of these desert communities are not sustainable as they rely on cheap oil as many of the cheapest surrounding areas are commuter communities. The uncertainty is tremendous in these markets, yet many investors are jumping in and gobbling up properties.

    http://www.thecashflowisking.com


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