The head of OPEC says that he can see oil hitting $200. OPEC’s President Chakib Khelil refuses to blame supply. His theory is that the price of the dollar is what will drive crude.
According to Reuters "Questioned about a possible rise which would go to $200, the minister did not rule out this eventuality, explaining that this rise is from now on indexed to the fall in the dollar or to the rise in the dollar."
Khelil is a sophist of the first order. He refuses to admit that the price of crude is based on several variables and not one. The price of the dollar is part of a collection, but does not stand on its own vis-a-vis oil costs.
In OPEC’s world there is an abundant supply of oil. Increasing demand in China, India, and much of the rest of the developing world do not mean much. Neither do the slowdowns in exports from large producers like Russia and Mexico.
It is as if the dollar existed but the world did not.
OPEC knows that if supply were increased, oil prices would drop. Some of that might be a psychological reaction, but that is as good as any other. The cartel will not even test that theory because it makes too much money with crude at $120.
The simple truth is that greed trumps reason.
Douglas A. McIntyre
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