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OPEC Agrees To Slash Output
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The White House condemned OPEC's move. Although falling oil prices have hurt oil-producing countries that rely on petroleum revenue to balance their budgets, White House spokesman Tony Fratto noted that the price declines have an effect similar to "an enormous tax cut" and have been a balm for the ailing U.S. economy.
"It's not clear that OPEC's actions will be effective given the shift in global demand and the ability of OPEC members to meet the cartel's targets," he said. "Regardless, 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."
In a statement, Sen. George V. Voinovich (R-Ohio) said, "These production cuts, coupled with Congress's inaction, are a stark reminder that a great deal of our nation's economic and national security is at the whim of a select few countries."
The steep drop in oil prices, more than two-thirds in five months, has roiled economic trends and calculations around the world. Analysts say that Venezuela had been counting on $90-a-barrel oil to balance its budget.
But it isn't only oil-producing nations that rely on fuel use to meet budget targets. Moody's Investors Service yesterday cut the credit rating on $2.4 billion of revenue bonds issued by the New York State Thruway Authority, in part because of falling traffic levels on the toll highway system.
Russian Deputy Prime Minister Igor Sechin, who attended yesterday's OPEC meeting although his country is not a member, said Russia had already cut production by 350,000 barrels a day and might cut an additional 320,000. Most analysts discounted his remarks, noting that Russian production is falling anyway because of natural field declines and a lack of investment.
Russia ranks second in the world in oil-production capacity, after Saudi Arabia.
Azerbaijan's oil minister also said his country would be willing to cut production by 300,000 barrels a day.
World oil consumption is about 85 million barrels a day.
"OPEC cannot be expected to bear alone the burden of restoring equilibrium to the market," Khelil said. "We, therefore, call upon non-OPEC producers to contribute to our efforts to restore market stability and eliminate harmful and unnecessary price fluctuations."
