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Energy: Cartel is king

Sep 7, 2000

The surging crude oil prices continue to cause worry amongst the oil consuming nations. The U.S and the EU countries have condemned the cartel for not lifting crude production and cooling of prices. The week so far has seen the natural resource scale new highs. Crude futures were trading above $33/barrel in the international markets. The crude prices have now remained above the crucial $30/barrel for almost a month.

The Organisation for Petroleum Exporting Countries (OPEC) is scheduled to meet on the September 10, to review the world oil prices and hike production accordingly. The market, however, is now of the opinion that the cartel will have to raise production by more than 500,000 barrels/day (b/d) if they are to cause any dent on the prices.

The current surge has its genesis in three rounds of production cuts carried out by the OPEC in early 1999. The cuts were undertaken to raise prices from their 25 year low of $10/barrel. The move has seen the prices skyrocket to the current levels. If the next production hike comes through it will be the third such hike since April '00 to cool off prices.

Even today, 20 years after the second oil shock, world oil prices continue to be the exclusive domain of the OPEC. In fact, over this period their control has increased if not remained the same.

The above table does not augur well for the oil consuming nations as the dependence on Central Asian crude has increased. One can only hope that the cartel does not abuse the hegemony it enjoys in crude production.

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