OPEC has now agreed to increase production by 2m barrels a day. This is somewhat good news to a volatile energy market where prices have been threatening to shoot through the roof.
For those who don't know, or couldn't care less... A primer (drawn from various online sources)
What is the price of petrol?
About $41 a barrel. The highest in 21 years.
Who cares?
Anyone who drives a car?? Oil prices in India have been artificially kept high by pouring the money into the Oil Suprlus Pool. Recent hikes in crude prices and our goverments policy of selling oil to the public at three times it's input price should puch petrol prices up another notch. This hasn't happened yet, probably since politicians didn't want to upset the gaz guzzling electorate before elections. The new govt will eventually have to allow petrol prices to stabilise at three times world levels. Look to paying close to Rs.40 a litre.
Why?
Demand Supply and terrorism
~ Huge growth in US and China have fuelled a large increase in demand
~ US refineries have been caught napping. They are unprepared to supply the amounts required
~ The Middle East accounts for a large percentage of the world's oil. Literally one in five barrels sold worldwide is from Saudi Arabia. The regional instability and rising fear of terrorism in Saudi Arabia has led to escalation in price.
What's being done
OPEC has ratified an increase of 2m barrels a day. But this is already in production, so it is merely formally ratifying the amount in circulation. Until prodn capacity in the US catches up, and the middle east stabilises.. prices could continue to rise.
The Al Saud family might be willing to accomadate the US. But the question is, for how long? They themselves are becoming increasingly unpopular. Terrorist attacks will in all likelihood increase once the AlQaeeda and co realise that they could bring America to its knees by attacking Ras Tanura or Abqaiq in the Arabian desert.
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