Last week crude oil prices dropped on speculation that OPEC would increase oil production; what were the experts thinking? For months now OPEC has made it clear that, in their (collective) mind they felt no connection with the record high crude prices. In fact, Iran and Venezuela voiced their opposition to any sort of a production increase; while the number-one producer Saudi Arabia was more amenable to a 500,000 barrel-a-day hike.
In the end OPEC left its output unchanged on Wednesday, blaming "speculative activity" for pushing up the price of oil and insisting that the market was well-supplied. Although OPEC promised to review this decision at its next meeting in February 2008, the prospect of a winter without a helping hand from the 13-member organization seemed to fuel exactly the kind of "speculative activity" it spoke out against.
In reality OPEC is correct. The issue is not production rather it is refinery capacity. Cruse production is not the issue because no matter how much is in the market place it can only be used once biproducts have been produced. I have not seen a car yet that runs on light crude. The fact is simple: U.S. refineries cannot cope with the ever-increasing demand of US cosumers. Its time for a infrastructure upgrade.
Fine line
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