BP vs. OPEC smackdown

Another week, another record-high oil price.  And it's only Monday.   Fingers of blame are pointing with more frequency and animation.  And still, the game of denial goes on.

Over the weekend, OPEC chief Chakib Khelil gazed into his crystal ball and came up with $170 oil by year's end.  His culprits of choice: a falling dollar and "political conflicts," i.e., more saber-rattling between Tehran and Washington.

Well, that's no doubt true as far as it goes, but then the OPEC guys go off the rails when, according to this article, "OPEC ministers generally say that oil output is sufficient, even as Saudi Arabia, the biggest producer, pledged to pump an extra 200,000 barrels a day next month to calm the market. OPEC has argued that speculation and the weak dollar are behind the record prices."

Did it escape the OPEC ministers' attention that a rebel attack in Nigeria took 200,000 barrels a day of production offline, zeroing out Saudi Arabia's magnanimous gesture?

Oh, and those darn speculators.  OPEC loves to blame them, and has blamed them, going at least as far back as $92 oil eight months ago. 

BP chief Tony Hayward is having none of that, calling the notion of speculators driving up the oil price a "myth."  More relevant, he told the World Petroleum Congress, is that "supply is not responding adequately to rising demand."  But then Hayward goes off the rails when, according to Reuters:

He added that politics rather than geology was the reason.

"The problems are above ground not below it," he said.

Now it's true enough, as Hayward complains, that OPEC nations don't like having Western oil majors like BP working OPEC oil fields the way they did in decades gone by.  But the fact oil-rich nations are giving BP less access than they used to doesn't change the fact that the world's biggest oil fields are in decline, and new ones aren't coming online nearly fast enough to pick up the slack.   I can understand why OPEC doesn't want to fess up to that reality, but why is Tony Hayward so reluctant?

The Daily Reckoning