OPEC in a quandary

Fazle Rashid from New York brThe Organisation of the Petroleum Exporting Countries ( OPEC ) is in a quandary. The steady fall in the price of petrol has precipitated the emergence of two diametrically opposing views. The petrol price in the global market reached $150 a barrel in March this year. The price has now come down to $108 a barrel.brIran and Venezuela will not allow the oil price to fall bellow $100 a barrel. They have threatened to cut down extraction of oil to keep the price above $100 a barrel. Kuwait and Algeria, two other OPEC members, have expressed fear that high energy cost will hurt their export trade because of the economic slowdown. Saudi Arabia is the largest oil exporter. It has not specified a price. But King Abdullah thinks the $100 a barrel is too high price, the New York Times (NYT) reported.brThese tricky questions will come up for discussion in the coming OPEC meeting slated for next week in Vienna. There will be two options open before OPEC. A cut in production could spark a backlash and the cartel could be described as greedy. The other choice is to leave the present production level unchanged. The demand is slowing and this could lead to a price collapse The oil price has quadrupled in five years.brThe high oil price has fueled an unprecedented economic boom in the Middle-East, Russia and South American countries that are flushed with petrodollar and are developing industries, attracting foreign business and expanding their economies. OPEC's net income from export is likely to exceed $1.0 trillion this year. The exporters in the first seven months of 2008 have already netted $642 billion. But bad days are looming large for OPEC. The United States is the largest consumer of oil. The demand here has dropped by one million barrel a day due to sluggish economic growth and tight credit market. The economic downturn which has taken the pandemic form is spreading to Europe and is not likely to spare Asia, considered the largest energy thirsty region.brSome analysts believe the group may opt for an informal cut in production, reducing output without much fanfare, instead of a formal announcement that could prove politically tricky, the NYT said. Nothing eye catching is expected from the coming week's OPEC meeting. The cartel may meet in six to eight weeks to announce a big cut then. There will be a cut if the decline in price continues. The OPEC is already trying not to allow the price to drop below $100 a barrel by 'discreetly paring production'. Saudi Arabia, NYT said, has already reduced its output by 50,00 to 100,000 barrel a day. OPEC is made up of 13 members. They together account for 40 per cent of world's oil production.