OPEC needs to cut production as oil sales are in USD, a currency on the slide.
There is an argument to be made that the US is lobbying its OPEC client states such as KSR and Kuwait to limit the use of their emergency reserves in order to keep oil prices high. High oil prices are actually assisting the US current account deficit at the moment. Washington doesn’t give a toss how many airlines (UAL and Mesa next) fall off the table as a result; there is a much bigger picture to focus on.
The price of oil will probably undergo a (short term) super spike of upwards of 200/b. One thing is for sure, we are going to witness a dramatic change in the way oil hits the market with the Kish bourse making headway (reason for nuclear concerns in Iran) and countries such as Venezuela signing “off USD” oil deals (the reason why Colombia is being armed to the teeth by the US).
The price of oil will come back down. Worldwide recession will ensure a huge drop in demand in the coming years and OPEC will eventually move toward marking oil against a basket of currencies with more future than the USD.
The current mess we are seeing: oil prices, conflict, finance bubbles, the decline of USD hegemony and subprime (the next big drama will be personal credit) are all linked to a single decision made in Washington many years ago.
Anybody know what the decision was?