Most OPEC countries said the cartel should not produce more than 25.8 million barrels of oil per day, citing slackened projections for global and U.S. economic growth.
Although OPEC said a year ago that a barrel of oil should cost $60, it is quite happy with the inflated profits from current prices in excess of $70. However, oil prices reached $78 prior to the meeting in Vienna and are likely to skyrocket further unless OPEC increases production.
Market watchers said the price of a barrel of oil could reach over $80 if the cartel does not take action. On August 1, the price of West Texas Intermediate (WTI) oil hit an all-time high of $78.77 per barrel.
Given the current U.S. mortgage crisis and declining nationwide employment, exorbitant hydrocarbon prices could trigger a recession in the U.S. and throughout the industrial world. In this case, the demand will drop and oil prices will go down, while reduced prices would deprive oil exporters of their super-profits.
Russia, the second largest oil exporter after Saudi Arabia, shares OPEC's economic interests. Although Russia, which is not a member of the cartel, has reached the limit of its capacity, it continues to benefit from OPEC efforts to reduce production.
But slackened global economic growth could cause an oil-price slump and would have a negative impact on both the Russian and OPEC economies. The situation is compounded by the fact that Russian producers and consumers rely heavily on a cheap dollar, as well as cheap imports, consumer goods and equipment.
The dollar would rebound and the cost of consumer goods would soar if the flow of petrodollars were reduced. Economic growth would slow down due to the cost of new equipment and the subsequent reduction in purchases.
However, a global oil-price hike and resultant economic slowdown can still be avoided. Saudi Arabia, the largest OPEC country, has surplus oil-production facilities and wants to increase daily output by 500,000-1,000,000 barrels, though it would probably have a hard time convincing the other cartel members.
In effect, a compromise is still possible - OPEC could decide to freeze oil production but will probably signal an imminent increase after the next meeting in December.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
