OPEC decision for $30 crude oil

Dec. 4, 2000
Wall Street Journal carried the following headline and comment regarding this subject:

Wall Street Journal carried the following headline and comment regarding this subject:

"OPEC thinks the world can afford $30 oil," and "OPEC members are becoming increasingly comfortable with crude oil prices of $30/bbl or slightly higher..."

In my mind this is clearly short-range thinking and in the long run will not help OPEC to maintain its volume.

One may recall when the price of some crude oils got up to $40 with Saudi light at $34. This encouraged all kinds of increased drilling and made previously unprofitable ventures quite acceptable. Witness the growth of production in the North Sea by Great Britain and Norway as well as Mexico.

This is bound to happen again. All kinds of secondary recovery projects will be profitable if the price holds.

Also there will be great drives for alternative energy projects. The fuel cell will really come into its own and the fuels will count heavily on natural gas as an example and not on crude oil derivatives.

I will predict that OPEC will profit from its greed for a couple years and then have to reconsider its new approach.

James McDonald
James McDonald Associates
San Marino, Calif.