Despite Deeper Cutbacks in Production, OPEC Can't Stop Collapse in Oil Prices

World Demand for Oil Continues to Drop as Global Recession Deepens; Prices Sink to 4 1/2-Year Low Despite Slash in OPEC Output By Record 2.2 Million Barrels a Day; Americans Continue to Turn Away From 'Gas-Guzzlers' in Drive to Cut Back on Fuel Consumption



The headquarters of the Organization of Petroleum Exporting Countries in Vienna, Austria. OPEC ministers met Wednesday to slash daily crude production by 2.2 million barrels. But despite the cutbacks, world oil prices -- which have been in free fall since September -- kept right on plunging, hitting a four-and-a-half-year low of $40.06 a barrel. Still outraged by gasoline prices hitting a peak of more than $4 per gallon in July, U.S. consumers have cut back sharply on their fuel consumption in a determined effort to force prices down. (Photo: Getty Images)


(Posted 5:00 a.m. EST Thursday, December 18, 2008)

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SPECIAL REPORT
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By ROBIN PAGNAMENTA
The Times of London

Oil prices slipped to a four-and-half-year low Wednesday, even as the Organization of Petroleum Exporting Countries (OPEC) announced its largest-ever production cut -- totalling nearly five per cent of global output -- in the cartel's latest effort to bolster prices.

At a meeting in Oran, Algeria, OPEC oil ministers said that it would slash supplies by a further 2.2 million barrels a day to 24.84 million barrels, effective January 1. The cut exceeded Opec's previous record cut in 1999 of 1.7 million barrels.

Chakib Khelil, OPEC's president and the energy minister of Algeria, said that the latest cuts had brought the total reductions announced by the cartel since August to 4.2 million barrels a day, or just under five per cent of global production, which averaged 86.3 million barrels a day during the third quarter of this year.

"The impact of the grave global economic downturn has led to a destruction of demand, resulting in unprecedented downward pressure being exerted on prices," OPEC said in a statement justifying the action.

Nevertheless, oil traders remained unimpressed, with some questioning whether all OPEC members would comply with the steep cuts -- a continuing problem for the organization.

After the announcement, the price of a barrel of benchmark crude in the United States quickly dropped to a low of $40.20, its weakest level since June 2004.

ANALYST PREDICTS OIL PRICES WILL FALL EVEN FURTHER

With demand collapsing, as some of the world's biggest economies enter recession and amid growing signs that Chinese oil consumption is also weakening, crude prices have plunged by more than $100 since July, when they briefly touched a record of $147 a barrel.

Andrew Horstead, an energy analyst for Utilyx, Ltd., predicted further price falls below $40 unless other countries, particularly Russia, joined forces with OPEC with production cuts of their own. "The demand numbers coming out of the U.S. are incredibly weak, so I doubt if this will be enough to push prices higher on its own," he said.

Earlier, there had been speculation that Russia and Azerbaijan, which are not OPEC members, would join in with the co-ordinated action and make cuts amounting to 600,000 barrels per day.

John Hall, an independent oil analyst, said that these represented a “token gesture” because both countries were already reducing production for reasons such as a lack of investment and were dressing these up as collaborative market action with OPEC. "The real problem OPEC has is one of compliance," Hall said. "The market just doesn't believe it can demonstrate its members are going to follow through in full."

Khelil rejected claims that some members might choose to produce more than their quotas. "I can tell you it's going to be implemented and it's going to be implemented very well because we do not have a choice," he said. "If not, the situation is going to get worse."

OPEC, which was formed in 1960 and whose 12 members include Saudi Arabia, Iran, Iraq, Nigeria and Venezuela, produces about 40 percent of the world's oil supplies.

WHITE HOUSE PROTESTS OPEC PRODUCTION CUT

The cartel's latest round of production cuts were condemned by the Bush administration. White House spokesman Tony Fratto said that the cuts risked further undermining an already fragile global economy. "OPEC has an obligation to keep the market well supplied and to consider the health of the global economy, so efforts to limit the benefits of lower energy prices are short-sighted," Fratto said.

Oil exporting governments are struggling to deal with the rapid collapse of oil prices, which is undermining their public finances. Saudi Arabia, OPEC's biggest producer and de facto leader, said last month that it was targeting $75 a barrel, which it considered a fair price for oil. Other members, including Venezuela and Iran, have been pushing for higher prices.

Average prices for regular-grade gasoline nationwide in the U.S. have plunged from a peak of $4.10 per gallon in July to an average of $1.67 per gallon now, according to the Web site GasBuddy.com.

In Britain, average prices have fallen to their lowest level since March 2007, according to the Automobile Association of the United Kingdom, to 89.5 pence per liter ($1.38 per gallon). Diesel fuel, helped by hefty cuts by supermarkets, fell to 1.02 pounds per liter ($1.58 per gallon).

A British family with two cars is spending 64.77 pounds ($100.59) less per month on fuel than it did last summer.

OIL DEMAND IN THE U.S. LIKELY TO BOTTOM OUT -- AND STAY FLAT

OPEC's efforts to turn the oil market around have traditionally been like steering a supertanker. It is a lengthy process.

Historically, the price of oil has been closely correlated with economic performance. High energy prices have fueled inflation, hit demand and crimped output. The record price of oil only five months ago undoubtedly played a part in the present slowdown.

Wednesday's production cuts were dramatic, but until the extent of the economic downturn becomes clearer, the recent slump in oil prices will be difficult to arrest and even harder to reverse. OPEC knows that the issue of price is one of supply and demand.

The U.S. government predicted Wednesday that demand for oil in the U.S., the world's largest oil-consuming country, is set to level off and is likely to remain flat between now and 2030.

Growing use of alternative fuels, such as ethanol; increased energy efficiency; a shift toward increased use of mass transit and a sharp decline in demand for and use of gas-guzzling cars and SUVs is shifting U.S. oil use downward, according to the Energy Information Administration in Washington.

In a report released Wednesday, the agency predicted that the use of renewable energy, including solar, wind, biofuels and tidal power, would grow by three per cent per year.

Overall energy use is expected to increase gradually, but at a significantly slower pace than expected a year ago.

The EIA, the arm of the U.S. government that produces official statistics on energy, also concluded that American reliance on imported oil will fall. It said that imported liquid fuels, mainly oil, would meet 40 percent of U.S. needs by 2025, down from 58 percent.

RECESSION SLOWING DOWN U.S. OIL DEMAND EVEN FURTHER

U.S. oil demand is weakening rapidly as the country slides deeper into recession. Figures from the International Energy Agency this month showed November demand in the 48 continental United States (excluding Alaska and Hawaii) was about 18.5 million barrels per day, down nearly 10 per cent from a year ago. That still represents some 21 per cent of global demand of about 86 million barrels per day.

U.S. reliance on imported oil from countries such as Saudi Arabia and Venezuela has also become a major political issue.

President-elect Barack Obama has pledged to reduce America's dependence on the fuel and this week appointed Stephen Chu as his energy secretary. Chu, a Nobel prize-winning physicist from the Lawrence Berkeley National Laboratory in California, is a proponent of alternative fuels and a developer of scientific solutions to climate change.

For his part, T. Boone Pickens, the Texas oil billionaire, has started a campaign to shift America away from its dependence on imported oil by building huge wind-power farms across a central belt of the U.S.

Without incentives to further reduce U.S. reliance on fossil fuels, the EIA forecast American carbon-dioxide emissions would continue to rise by 0.3 per cent a year, compared with an annual average increase of 1.1 per cent since 1990.

(Robin Pagnamenta is the energy and environment editor of The Times of London.)

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Volume III, Number 83
Special Report Copyright 2008, Times Newspapers Ltd.
The 'Skeeter Bites Report Copyright 2008, Skeeter Sanders. All rights reserved.

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'You Dog!' -- Bush Learns First Hand Just How Fed Up the World Is With Him

On Farewell Visit to Iraq, Bush Is Paid the Supreme Insult When An Angry Iraqi Journalist Tosses His Shoes At Him During Press Conference With PM Al-Maliki -- A Dramatic Show That the Most Unpopular President in Modern U.S. History Is Even More Bitterly Disliked Abroad



In this dramatic image captured on video, President Bush ducks to avoid getting hit in the head by a shoe that was tossed at him by an angry Iraqi journalist during a news conference in Baghdad Sunday with Iraqi Prime Minister Nouri al-Maliki (right) in Baghdad. The journalist, in a bitter protest against the continued presence of U.S. troops in his homeland, shouted at Bush in Arabic, "This is a farewell kiss from the people of Iraq, you dog!" and tossed his shoes at him -- considered in Arab culture to be the ultimate show of contempt -- before being wrestled to the floor by Iraqi security officers and U.S. Secret Service agents and dragged out of the room. (Image courtesy Reuters TV)


(Posted 5:00 a.m. EST Monday, December 15, 2008)
(Updated 11:00 a.m. EST Tuesday, December 16, 2008)

By SKEETER SANDERS

When George W. Bush moves out of the White House next month, ending eight years of the most controversial presidency in modern American history, millions of Americans will breathe a collective sigh of relief. So deeply unpopular is Bush that even Richard Nixon had greater public support when he resigned the presidency in disgrace in 1974 as a result of the Watergate scandal.

Bush's unpopularity among Americans is well-documented. Yet he's even more deeply disliked abroad -- and nowhere was that made more evident than in Iraq on Sunday, when the outgoing president was given what in Arab culture is considered the ultimate show of contempt.

While on an unannounced visit to Iraq -- the last of his presidency -- Bush experienced in real life what the late actor and stand-up comedian Rodney Dangerfield only joked about: He got no respect, no respect at all.

In many ways, the president's trip -- kept under wraps until his arrival in Baghdad -- was a victory lap without a clear victory. Nearly 150,000 U.S. troops remain in Iraq fighting a war that is intensely disliked across the globe -- and at home. More than 4,209 members of the U.S. military have died in the conflict, which has cost U.S. taxpayers $576 billion since it began five years and nine months ago.

Polls show most Americans believe the U.S. erred in invading Iraq in 2003. Bush ordered the nation into war against Saddam Hussein's Iraq while citing intelligence claiming the Mideast nation harbored weapons of mass destruction. The WMDs were never found, the intelligence was discredited, Bush's credibility with U.S. voters plummeted, despite Saddam's capture and subsequent execution.

ANGRY IRAQI JOURNALIST CALLS BUSH A 'DOG,' FLINGS HIS SHOES AT HIM

During a joint news conference in Baghdad with Iraqi Prime Minister Nouri al-Maliki, an Iraqi journalist -- in an apparent show of anger over the continued presence of U.S. troops in his homeland -- began shouting at Bush in Arabic, "This is a farewell kiss from the people of Iraq, you dog!"

The journalist, identified as Muntadar al-Zeidi, had taken off his shoes and flung them at the president, forcing him to duck to avoid getting hit in the head by them. Al-Zeidi, a correspondent for Al-Baghdadia television, was immediately wrestled to the floor by Iraqi security agents and U.S. Secret Service agents and dragged out of the room, screaming and cursing.

Bush remained unruffled, telling reporters, "It doesn't bother me. If you want the facts, it was a size 10 shoe that he threw." He later played down the incident. "I don't know what the guy's cause is... I didn't feel the least bit threatened by it."

Throwing shoes at someone is considered the ultimate insult in Arab culture. When a giant statue of Saddam Hussein was pulled down from its pedestal in Baghdad's Firdos Square on April 9, 2003, many Iraqis, jubilant at the fall of the dictator, repeatedly beat the statue's face with their shoes.

UPDATE: SHOE-THROWER BEATEN WHILE IN CUSTODY

On Tuesday, al-Zeidi was reported to have been beaten while in custody and taken to a U.S. military hospital in Baghdad, while supporters of the Iraqi journalist staged protest rallies across Iraq demanding his release, with many wearing shoes attached to their belts in a show of solidarity.

Al-Zeidi has become a folk hero throughout the Arab world, with many saying that his action against Bush symbolized their frustration with more than five years of U.S. "occupation" in Iraq.

Al-Zeidi's older brother Dargham told the British Broadcasting Corporation that the TV reporter suffered a broken hand, broken ribs and internal bleeding, as well as an eye injury. H

Dargham al-Zeidi said that despite offers from many lawyers, his brother has not been given access to legal counsel since his arrest by Iraqi security forces under the command of Mowaffaq al-Rubaie, Iraq's national security adviser.

SHOE INCIDENT SYMBOLIC OF A WORLD FED UP WITH BUSH

After eight years of an aggressive foreign policy -- dominated by the 2003 invasion of Iraq that most of the world opposed from the start and which eventually soured Americans as the war dragged on with no conclusive end in sight -- it is difficult to avoid viewing the shoe incident in Baghdad as symbolic of pent-up public anger over Bush's policies exploding literally in the president's face.

Indeed, since Barack Obama's election as Bush's successor in November, Bush's public standing has sunk to yet another new low, with America and the world anxious to be rid of the lame-duck president.

A recent global survey by the Pew Research Center of more than 24,000 people in 24 countries found that Bush is deeply unpopular, with overwhelming majorities of respondents in 21 countries saying they have little to no confidence in the outgoing president.

While Bush has a 60 percent unfavorable rating in the U.S., Australians dislike him even more, giving him a 76 percent negative rating. The country where Bush's negative ratings are the highest? Turkey, with a whopping 89 percent.

Significantly, majorities in 18 of the 24 countries surveyed have a higher confidence in Obama, with the notable exceptions of Russia, where Obama barely breaks even, 39-37 percent, and -- somewhat surprisingly -- China and Mexico, where the president-elect draws a higher unfavorability rating.

NIXON FACED FAR GREATER HOSTILITY IN '50S VISIT TO VENEZUELA

Bush should be grateful that it was only a pair of shoes that was hurled at him and not something worse. Fifty years ago, when Nixon was vice president under Dwight Eisenhower, he came under a much more violent attack -- a rain of rocks and bottles by anti-American protesters while on a goodwill visit to Caracas, Venezuela on May 13, 1958.

Shortly after their arrival at Caracas Airport, Nixon and his wife, Patricia, became the targets of a barrage of rocks and bottles hurled at them by the protesters, who later swung pipes and clubs in an attempt to smash into the Nixons' limousine.

Author Phillip Melanson recalls in his book, The Secret Service: The Hidden History of an Enigmatic Agency, that the Nixons "barely escaped with their lives. That they did remains a testament to the quick wit and courage of the couple's Secret Service detail," with agents using their bare hands "to stop protesters from ripping open the limo doors and assaulting the vice president and his wife . . ."

(The Secret Service, charged with protecting the president full-time since 1908, began protecting the vice president in 1951 -- although only at the vice president's request. Full-time protection of the VP did not begin until 1962.)

Unlike Nixon in Caracas 50 years earlier, there were no angry mobs attacking Bush's motorcade as it ventured through Baghdad's streets -- the first time he has gone somewhere in the Iraqi capital other than a military base or the heavily protected Green Zone.

In fact, like all his previous visits to Baghdad, most Iraqis were unaware the president was in town. Press reports said Bush's unmarked motorcade passed through darkened streets that appeared heavily guarded, before arriving at Prime Minister al-Maliki's residence.

There, the president and the prime minister signed a security pact setting out new guidelines for U.S. troops in Iraq when the United Nations resolution authorizing the troop presence there expires on New Year's Eve. "The war is not over, but with the conclusion of these agreements... it is decisively on its way to being won," Bush asserted.

But is the war really being won? the longer it drags on, the more Bush's promises of victory ring as hollow as those of Lyndon Johnson's assertions about the Vietnam war. And history showed what happened with Vietnam.

It was left to Nixon to clean up Johnson's mess. And now it will be up to Obama to clean up Bush's.

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Volume III, Number 82
Copyright 2008, Skeeter Sanders. All rights reserved.

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