Now, panic is gripping producers as prices drop. Oil is down by half since July, and the speed of the decline has stunned oil-rich governments that have become dependent on high prices.
As the global economy continues to weaken, the Organization of the Petroleum Exporting Countries faces its toughest test in years.
The problem for the oil exporters, who meet for an emergency session in Vienna on Friday, is to find a way to stop the price drop at a time when oil consumption is falling markedly in industrialized countries. Even the Chinese economy, long the biggest engine of growth for oil demand, seems to be cooling.
Most analysts expect the group to announce a production cut of at least a million barrels a day, which would be more than 1 percent of the world oil supply. Some experts warn that if the cartel took too much oil off the market, it could push prices up so much as to worsen the global economic crisis.
“OPEC’s problem is they don’t know how much demand is falling,” said Jan Stuart, an energy economist at UBS. “So the risk they run is either they don’t do enough, or they do too much. That’s a tough choice.”
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- The New York Times: OPEC Ponders Choices as Oil Prices Plummet, October 21, 2008
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