On Friday, the OPEC cartel members decided on the reduction in oil production by 1.5 million barrels a day. This action was taken against the “drastic collapse” in the oil prices due to the global recession.
Chakib Khelil, OPEC president and also Algeria’s oil minister made it clear that the production of oil would “definitely” reduce if the oil prices still continue to decline in the coming months. “The fundamentals are not good. This is a crisis situation’ he added.
Oil prices have never declined so drastically as in the last three years. As compared to $145.29 a barrel on July 3, it has now reduced to $64.15. Even the gasoline prices have reduced to average $2.78 a gallon from $4.11 on July 17.
It is a consequence of the global financial crisis that oil consumption has reduced in countries like United States, Europe and Japan. Even the developing countries are facing a slow in energy demand. This is the primary reason that there is cut in prices and OPEC has no option but to reduce prices.
The white house has been critical to this price cut and calls it “anti competitive”. British Prime Minister Gordon brown also agrees to this.
OPEC has organized various emergency meetings recently. It was earlier persuaded by Venezuela and Iran in these meetings that the oil production should decline by 2 million barrels a day. Even rivals like Saudi Arabia and Iran tried to solve problems together in these sessions.
OPEC made an effort to gather many oil producing companies to “contribute to efforts to restore prices to reasonable levels, and eliminate harmful and unnecessary fluctuations.” As 40 percent of the worlds oil exports are controlled by OPEC.
