An Iranian OPEC official on Saturday mentioned that OPEC members are trying to decide whether to cut output to “shore up” market prices for crude oil.

“The market is oversupplied by at least 1 million barrels a day. If OPEC would like to remove this additional oil out of the market, then OPEC has to cut some production,” OPEC governor Mohammad Ali Khatibi told Dow Jones in a telephone interview. -Source

Oversupplied by only 1 million bbls per day?  Is that all?

Perhaps they should wait to see what demand looks like after China restarts manufacturing operations after the closing of the Olympics.  As I mentioned in a previous post, China had shut down manufacturing in an effort to reduce pollution in preparation for the games back at the beginning of July.  Right about the time crude prices started to slide.

Energy China, crude prices, Olympics, OPEC

The government response to high gas prices is turning humorous.

Last week President Bush traveled to the Middle East to try and convince the Saudi’s, among others, to start producing more oil to help fend off even higher-yet oil prices.

Their answer: No dice.

Good for them.

President Bush knew the outcome of this little field trip to play the “whoa is we” card before he even boarded Air Force One.  After all, Bush is an oil man at heart, and a business man by trade.  Not only that, he has some very astute financial and economic gurus that know exactly what’s driving the price of oil.

But he’s also a politician.

The President is also a politician, and he’s still looking for your vote.  Not directly, but in a round about way, the Republican party.

His trip to the Mid East ended how those of us who favor capitalism and understand the basics of economic forces knew it would.  However, the end result lets the President say: “Well folks, I tried.”

Bring on the lawsuits!

It gets even better!  Today, the House voted to approve legislation to let the Justice Department sue the members of OPEC for withholding oil and conspiring to drive up oil prices.

“This bill guarantees that oil prices will reflect supply and demand economic rules, instead of wildly speculative and perhaps illegal activities,” said Democratic Rep. Steve Kagen of Wisconsin, who sponsored the legislation.

Right.  Because that’s how it works. Here you have the worlds most developed economy, one that stimulates the global economy, that is forced to import oil to keep the economy liquid, and they’re going to sue the very countries that import that oil?

What’s interesting is that the White House has threatened to veto this bill.  Why?  Because they know better! It’s one thing to make a visit to ask politely to help us out of a jam.  It’s another thing to try and levy baseless financial and legal claims against other countries who control the flow rate to our oil addicted economy.

It’s the dollar, stupid!

The value of the almighty dollar (or lack thereof) is driving the value of crude.  Think about it.  If your national currency is the Euro, and the U.S. dollar is dirt cheap compared to the Euro, and crude is priced in U.S. dollars, aren’t you going to buy (or import) as much crude as you can regardless of whether you need it or not?

Don’t you think this is why China is developing their own strategic petroleum reserve, and European countries are expanding on their existing ones?  It’s not because there is a shortage of oil, it’s because the stuff is cheap because it’s traded in U.S. dollars.

These latest moves by our politicians is nothing more than a farce in an election year to say “We see you hurting out there, and we’re trying our hardest to fix this… but that stinking no good oil man in the Oval Office is working against us all, and he’s the one who’s truly hurting you!  Vote Obama!

Another example of our feel good, try hard government trying to understand and remedy a free market.

Economics, Energy, Politics Economics, free market, oil, OPEC

Iranian President Ahmadinejad came out Sunday at the end of a rare OPEC summit stating that OPEC’s members have expressed interest in converting their cash reserves into a currency other than the depreciating U.S. dollar, which he called a “worthless piece of paper.” (It later became clear that the “members” he is referring to is none other than Iran and Venezuela… go figure.)

He went on to blame President Bush’s policies for the decline of the dollar and its negative effect on other countries.

In an effort to tag-team the idea, Venezuelan President Hugo Chavez jumped in from the sidelines saying “the empire of the dollar has to end.”

Chavez sees the Euro as a better option to hold in reserve, and further went on to affirm his position stating that the U.S. dollar has been in a free-fall without a parachute.

While it’s easy to see that the the Chavez-Ahmadinejad duo are taking any opportunity to take shots at the U.S. while on an international podium, I have to wonder if the declining dollar could force OPEC’s hand to switch to another currency.

The question then becomes, what effect does that have on the U.S. economy?

Economics, Energy, Oil & Gas, Politics Ahmadinejad, Chavez, Currency, dollar, oil and gas, OPEC, petroleum