Oil crisis in 2008, Comments posted on CNN By Shan Saeed

June 17, 2008
High oil prices here to stay
Posted: 716 GMT

LONDON, England – If you think the price of oil can't go any higher, you could be disappointed. On Monday, oil shot up towards a $140 a barrel, a record, before settling the day at $134 a barrel.

Even word that Saudi Arabia would increase production wasn't enough to keep oil from ratcheting higher. And even though it ended well off its high of the day, we're still above $130 a barrel, with predictions it could hit $150 by year end, and eventually move to $200 a barrel.

Saudi Arabia has called a meeting for June 22 to help stabilize prices. But will that really make any difference. Barring some dramatic announcement, I'm skeptical. I'm in the camp that believes what's going on in the oil market isn't just the result of a weak dollar, or speculation. It's based on the belief that there is a structural shift going on, based on a need for increased oil as developing nations continue to grow their own economies, and not enough supply.

You can point the finger at speculators, as many do, but they aren't the problem. They just follow trends, they don't create them.

Even a CNN quickvote shows the public is skeptical that a production increase by the Saudis will ease prices. 43 percent said yes, 57 percent said No.

Oil producers have lost control over pricing. And while high prices are great for producers' revenues, they always worry that if the price gets too high, it could lead to a sharp slowdown in the global economy, hurting demand, and causing a sharp fall in the price of oil.

I don't think that's a worry for the oil producers right now. The bigger worry is their inability to keep prices from rising, and the political pressures that brings. That's what's triggering the upcoming meeting, the Saudis have to appear like they are doing something.

The problem is, the market has moved beyond their ability to control it.

Tell me what you think.

Posted by: CNN International Finance Editor, Todd Benjamin
Filed under: Business


June 18th, 2008 3:28 am ET

Jason raises a good point above about oil being used in the plastics industry etc. However I do not think anyone says we should stop using oil for everything, but we should look at reducing demand and using alternatives.

If you think the Romans were silly for using lead pipes, then we are even more silly for poisoning ourselves with exhaust fumes from our motor vehicles :) We have alternatives and should know better!
Shan Saeed June 18th, 2008 3:44 am ET

Todd,
Oil prices will come down very soon. It will come down to US $ 97 per barrel. It is charging a premiu of $ 50 right now. I have number of predictions in 2004. On June 10,2004, I have made a TV appearence on TV and said oil will touch $ 45 after 2-months.You can check he record on August 10, 2004, Oil prices were trading at $ 45 per barrell. I have mentioned in number of artilces that got published in different newspaper that market forces are the best determined of the prices. Today, these high prices levels are not sustainable in the long run and will bring the oil prices down and easing the markets. Reasons:

1. Most countries including developing and developed are going through a slowdown in their economies.
2. China and India consumption will stabilize in the next 9/12 months or so bringing oil prices to market levels
3. Oil supplies are moving into the market quite rapidly with supply concern in Venzuela and Nigeria easing up.
4. Countries like Canada [Alberta Sand], Norway [ Statoil] , Central Asia Repulic [CAR]and Brazil will become move active in the market
5. Middle eastern countries [ Saudi, Kuwait and Qatar] will supply more than the demand

Thanks

Shan Saeed
University of Chicago
Singapore Campus
Andre DeSimone Alonso June 18th, 2008 9:50 am ET

I am still inclined to believe that speculators are keeping strong hands on oil prices no matter what sort of global conjecture we´ve seen nowadays. Those prices are artificial in many ways and they are unsustainable for even oil produces in the long-term.
I think that as long as we get recuperated the financial markets, these sort of speculations will no longer take place insofar as profits from traditional investiments, as the stock markets, will resurge and the "oil bubble" will lose its raison d'etre.
That is why I cannot embrace Mr. Benjamin's theory at all.