OPEC Summit Delegates: OPEC Not To Blame For Record Prices, Prices May Hit $150
November 16, 2007 5:31 a.m. EST



Jacob Cherian - AHN News Writer
Riyadh, Saudi Arabia (AHN) - Speakers at the Organization of the Petroleum Exporting Countries summit have said that OPEC is not to blame for the surge in oil prices; rather, they maintained that the record prices were a result of short-term supply disruptions and the decline in the dollar.

Investors normally turn to commodities like oil as a hedge against a weakening dollar.

According to Robert Mabro, director of the Oxford Institute of Energy Studies, OPEC does not influence oil prices a great deal since price levels are maintained by the role of financial market mechanisms in play.

"The price of oil today is determined by people buying and selling futures contracts," said Mabro, reports Thomson Financial.

"A futures contract is not about oil — it is just an investment in a financial instrument by financial institutions. So we are in a situation where the price of oil is determined by a market that is not even about oil. That situation causes enormous volatility," he said.

OPEC delegates were told on Thursday that oil could hit $150 a barrel.

Kuwait-based consultant Usameh Jamali told the Gauardian that industry players attending the summit in Riyadh spoke about prices moving up as much as $125 or $150 going forward. "People in the market believe that $100 is sustainable and there is continued upward pressure ... we should be expecting some downward pressure in a couple of years only," added Jamali. Consultants and advisors to OPEC say rising oil prices are not necessarily favorable to producers as volatility in the market makes investment in future supplies more difficult to ascertain. ''The more volatility we have, the less price serves as a signal for investment, Mabro noted.

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