OPEC’s Meeting Today

Another variable in OPEC’s ability to sustain cooperation in the cartel is something they will discuss today at their meeting: the fall of the US dollar. As this story reports, the currency in which oil trades are denominated us the US dollar, so its decline is not good news for oil producers who are trying to raise revenues from the sale of oil by restricting output to raise prices. As this story says,

Continued dollar weakness another incentive for OPEC members to bust quotas, OPEC source says. In the short-term, producers can maintain their purchasing power by selling more crude. The dollar recently traded at 27 month lows against the euro and at seven month lows against the yen.

This Bloomberg News story also summarizes the OPEC meeting, and mentions how much cheating on the production quotas is occurring, as well as the motivations for it:

Rather than raise the targets, members have pumped more than promised to fight Russia, Norway and other rivals for market share.

Isn’t competition a grand, disciplining force?