Re: OPEC & Oil Prices - Typos corrected

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

Henry,
     I didn't say anything about $20/ barrel.  I said the
Saudis want $25/barrel, which is not too far below
what it is now and could easily be attained later this
year.  I agree that politics is very important, but it is
not everything.  There is a lot of money involved in this.
Barkley Rosser
-----Original Message-----
From: ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú <hliu@xxxxxxxxxxxxxx>
To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
Date: Tuesday, March 14, 2000 10:39 AM
Subject: Re: OPEC & Oil Prices - Typos corrected


>Barkley, as usual, oil prices are determined by politics.  The prospect of
$20
>oil is almost non-existent this year. Riyadh wants to appear to cooperate
with
>Washington who wants to appear to be doing something about oil prices in an
>election year.  But its all just political theatre.
>
>Henry
>
>Below is the latest news:
>
>LONDON, March 13 (Reuters) - Oil prices closed steady on
>Monday as dealers awaited fresh signals from OPEC on its policy
>for output when an agreement on supply curbs expires at the end
>of the month.
>    London Brent futures last traded up one cent at $28.95 a
>barrel and U.S. light crude was up 26 cents at $32.02.
>    Traders want to know exactly how much extra supply OPEC and
>its non-OPEC ally Mexico have in mind but officials in producing
>countries say negotiations still have reached no decision.
>    Price hawk Algeria urged fellow OPEC producers to wait until
>after the second quarter of this year to consider raising oil
>supplies.
>    "We plead for keeping discipline," Energy and Mining
>Minister Chakib Khelil told Algerian news agency APS.
>    "We want to see the market during the second quarter. If
>prices exceed $30 a barrel and that would compromise the market
>balance then we may convene an extraordinary meeting to take
>together the needed solutions," he said.
>    Traders said they expected OPEC at its March 27 meeting to
>agree to up output -- but by less than the two million bpd many
>analysts estimate is needed to return the market to equilibrium.
>    However, public holidays this week among OPEC's Moslem
>states for the annual haj pilgrimage to Saudi Arabia are likely
>to mean a break in preparations for OPEC's conference.
>    Dealers said growing concern over a summer shortage of
>petrol in the United States, which accounts for 40 percent of
>gasoline consumption, was holding prices high despite the
>expectations of an OPEC output increase.
>    OPEC President Abdullah al-Attiyah in television remarks
>released in the United States on Friday said that Washington was
>seeking a 2.5 million barrels-per-day (bpd) increase in OPEC
>production when the cartel meets in Vienna from March 27.
>    IRAN SAYS OPEC INCREASES SHOULD BE SMALL
>    The International Energy Agency said Friday that OPEC needed
>to raise production by 2.3 million bpd in order to replenish
>inventories to normal levels.
>    But OPEC's Iran said producers should release only small
>amounts over limited periods to guard against a price fall.
>    Tehran, which previously opposed production hikes, last week
>softened its position after talks in Riyadh with Saudi Arabia.
>    Non-OPEC Mexico has made clear it is prepared to go it alone
>if it is not happy with OPEC's plans to relax curbs, officially
>worth 4.316 million barrels daily, or 15 percent of cartel
>output.
>    Leakage outside quotas recently has increased, leaving
>actual OPEC supply about 1.4 million bpd above official
>allocations.
>    U.S. Energy Secretary Bill Richardson said he had not
>received assurances from Mexico, Norway or any major
>oil-producing nation that they would independently increase
>their oil production if OPEC did not agree to higher oil output
>levels.
>    Richardson repeated the Clinton administration wanted to see
>a sizeable increase in OPEC's production. However, he declined
>to say if a 1.5 million bpd increase would be sufficient.
>    Richardson said he would continue talks with OPEC ministers
>as the group's meeting approaches on March 27 in Vienna. He said
>he planned to meet in person with several OPEC oil ministers
>this week, but he declined to name them.
>    In Switzerland, Bank of England Governor Eddie George said
>central bankers meeting at the Bank for International
>Settlements (BIS) believed excessive oil price rises were not in
>the interest of the world economy.
>    Prices in dollars per barrel:
>                              Mar 13          Mar 10
>                             (close)         (close)
>    IPE April Brent           28.95           28.94
>    NYMEX April light crude   32.02           31.76
>    ((Richard Mably, London newsroom +44 171 542 6280 email
>london.energy.desk@xxxxxxxxxxx))
>
>"J. Barkley Rosser, Jr." wrote:
>
>> Henry,
>>      Aw, I didn't think that I was being that picky.  Never
>> said boo about spelling.
>>      BTW, crude oil prices peaked in March, 1981 at
>> $40/barrel.  I understand that the Saudis currently
>> view $25/barrel as about right from their perspective.
>> They don't want a demand-reducing recession nor do
>> they want Americans trading in their gas-hog SUVs for
>> Honda Civics or funding alternative tech development,
>> despite Paul Davidson's assurance that such an idea is
>> a waste of time.  From what I hear, the runup in fuel cell
>> stocks may be one part of recent stock market behavior
>> that is not a bubble.
>>      As far as I am concerned the benefit of high oil prices
>> (aside from puffing up real estate and oil rig biz in Texas)
>> is to push us to alternative tech and get us off polluting the
>> atmosphere and bringing on global warming.
>>       A more general issue here that relates to my earlier
>> remarks about upward spikes of oil prices has to do with
>> the idea that there may be critical degrees of concentration
>> or market power at which there is a discontinuity in the nature
>> of the market.  I explored this issue at the end of Chapter 3 of
>> my 1991 book (From Catastrophe to Chaos: A General Theory
>> of Economic Discontinuities) and posed this in terms of
>> catastrophe theory, following a model put forth by Woodcock
>> and Davis.  Others who have argued for critical levels of
>> concentration leading to discontinuous changes in market
>> behavior include Bain (1951) and Bradburd and Over (1982).
>> There is also a rather large literature using game theory that
>> suggests that there may be critical numbers of agents.  I discuss
>> this stuff at greater length in my in press second edition.
>>       References:
>> Joe S. Bain, 1951, "Relation of Profit Rate to Industry
>> Concentration, American Manufacturing, 1936-40," Quarterly
>> Journal of Economics, 65, 293-324.
>>
>> Ralph M. Bradburd and A. Mead Over, 1982, "Organizational
>> Costs, 'Sticky Equilibria,' and Critical Levels of Concentration,"
>> Review of Economics and Statistics, 64, 50-58.
>> Barkley Rosser
>> -----Original Message-----
>> From: ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú <hliu@xxxxxxxxxxxxxx>
>> To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>> Date: Monday, March 13, 2000 3:21 PM
>> Subject: Re: OPEC & Oil Prices - Typos corrected
>>
>> >Sorry, in a few place 1996 was mistyped as 1966. This is to correct it
>> before Barkley
>> >gets excited. ;-)
>> >
>> >Henry
>> >
>> >"ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú" wrote:
>> >
>> >>  In the post World War II era oil prices have averaged $19.27 per
barrel
>> in 1996
>> >> dollars. Through the same period the median price for crude oil was
>> $15.27 in 1996
>> >> prices. That means that only fifty percent of the time from 1947 to
1997
>> have oil
>> >> prices exceeded $15.26 per barrel. Prices have only exceeded $22.00
per
>> barrel in
>> >> response to war or conflict in the Middle East.  In 1972, $3.50 oil
>> translates to
>> >> $11.50 in 1996 dollars.
>> >>
>> >> The long term view is much the same. Since 1869 US crude oil prices
>> adjusted for
>> >> inflation have averaged $18.63 per barrel in 1996 dollars. Fifty
percent
>> of the time
>> >> prices were below $14.91.
>> >> Using long term history as a guide, those in the upstream segment of
the
>> crude oil
>> >> industry structure their business to be able to operate profitably
below
>> $15.00 per
>> >> barrel half of the time.
>> >>
>> >> Pre Embargo Period Crude Oil prices ranged between $2.50 and $3.00
from
>> 1948 through
>> >> the end of  the 1960s.
>> >> The price oil rose from $2.50 in 1948 to about $3.00 in 1957. When
viewed
>> in 1996
>> >> dollars an entirely different story emerges. In 1996 dollars crude oil
>> prices
>> >> fluctuated between $14 - $16 during the same period.  The apparent
price
>> increases
>> >> were just keeping up with inflation.
>> >>
>> >> >From 1958 to 1970 prices were stable at about $3.00 per barrel, but
in
>> real terms the
>> >> price of crude oil declined from above $15 to below $12 per barrel in
>> 1996 dollars.
>> >> The decline in the price of crude when adjusted for inflation was
further
>> >> exacerbated in 1971 and 1972 by the weakness of the US dollar.
>> >>
>> >> OPEC was formed in 1960 (as you and Barkley have pointed out) with
five
>> founding
>> >> members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.  By the end of
>> 1971 six
>> >> other nations had joined the group: Qatar, Indonesia, Libya, United
Arab
>> Emirates,
>> >> Algeria and Nigeria. These nations had experienced a decline in the
real
>> value of
>> >> their product since foundation of the Organization of Petroleum
Exporting
>> >> Countries.
>> >> That, Paul, is why I said cheap oil may not be in the US's national
>> interest.  Of
>> >> course, neither am I advocating or projecting $100 oil. $18 oil in
1996
>> dollar will do
>> >> very nicely for all concerned.
>> >>
>> >> Henry C.K. Liu
>> >>
>> >
>> >
>
>