Aaarghhh! Looks like the world is set for another round of price uncertainty for their gallon of gas after Russia and Saudi Arabia announced cuts in production. According to Government communique, Russia will reduce production by five hundred thousand barrels and Saudi by 1 million barrels per day.
In total, that only represents about 1.5% of the world’s oil production but it was enough to increase the price of Brent Crude by almost a dollar, peaking at USD76.3 a barrel within hours of the announcement. Now, this is still only about 50% from the peak of last July but it is a worrying increase none the less.
After the last peak in oil prices, it was not just the price at the pump that hit us in the pocket. Just about everything that we buy is transported at some stage in its life by a gas-burning truck, boat, plane, train or car and so we suffered from crippling inflation. Since last summer, the gradual fall in oil prices has meant that the price at the pump has fallen about 30% and inflation has cooled.
Even though the ‘West’ has banned the sale of Russian oil due to Mr Putin’s extended Holiday in the Ukraine, they have managed to find ready markets with their allies like China or energy-hungry countries like India. Just goes to prove that discounted oil will always find a market.
The trouble is there is a pesky global economic slow-down that has decreased demand and thus kept prices low. It is, of course, somewhat ironic that the very shortage that Saudi and Russia have been trying to maintain to keep the prices high and thus revenues flowing in was probably caused by the reduction in supply caused by the attempt to manipulate price of oil.
Back in the day of US of Americaland, oil self-sufficient Washington could dial up the taps a little to lessen the hurt. But good ol’ Uncle Joe has put an end to that and we are now more than ever at the mercy of the cartel. Expect more pain at the pumps and supermarket check-outs soon.
