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.
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