Wednesday, January 7, 2015

Causes Of The Lower Gas Prices

Ex-Wells Fargo CEO Kovacevich: OPEC 'Wants to Punish Fracking' Through Price War

Wednesday, 07 Jan 2015 07:20 AM
By Dan Weil
  Comment  |
   Contact  |
  Print   |
    A   A  
OPEC's refusal to cut oil production in response to crude prices' drop to 5 ½-year lows represents an attack against U.S. companies using hydraulic fracturing (fracking) to extract oil, says former Wells Fargo CEO Richard Kovacevich.

Fracking becomes unprofitable with oil priced around $60 to $70 a barrel, experts say. U.S. crude traded at $48.93 Tuesday morning.

"OPEC is playing this game to see how long it's going to last. They want to punish some of the fracking that's going on," Kovacevich told CNBC.

The world oil market has 1 million barrels a day of surplus capacity, and Saudi Arabia could easily reduce its output by that amount, he said. "I was playing golf with the CEO of a major oil company this past weekend, and he says 1 million barrels is not a lot to absorb."

In any case, Kovacevich noted that the oil price plunge constitutes a boon for U.S. consumers, and he thinks crude will rebound to $70 or $80 by mid-year in any case.

To be sure, Steve Forbes, chairman of Forbes Media, is none too impressed with OPEC.

"OPEC's impact on prices is grossly exaggerated," he wrote in Forbes. "Speculators believed OPEC would magically pull a rabbit out of the hat [at its November meeting]. But OPEC doesn't even have a hat, much less a rabbit."

The cartel barely accounts for more than one-third of global oil output, Forbes explained. Oil production has exploded to at least a 31-year high in the U.S.

"The biggest factor in the pummeling of petroleum prices . . . is the strengthening dollar," Forbes said.

Related Stories:
© 2014 Moneynews. All rights reserved.


Read Latest Breaking News from Newsmax.com http://www.Newsmax.com/Finance/Kovacevich-OPEC-fracking-oil/2015/01/06/id/616763/#ixzz3OCYJi9eI
Urgent: Should Obamacare Be Repealed? Vote Here Now!

No comments:

Post a Comment

Thanks for commenting. Your comments are needed for helping to improve the discussion.