Friday, August 01, 2008

The Oil Price

OPEC president Chakib Khelil earlier this week indicated that oil prices, over the long term, should drop and that the black sludge should be trading at between $70-$80 a barrel. This is predicated on a strengthening U.S. dollar and restoration of confidence in the greenback's value, and the defusing of any crisis surrounding Iran, which has spooked markets.

An interesting sidenote. In going through some old files, I came across some notes from a 2003 U.S.-Russia dialogue. In it, a Russian economist was discussing how, when oil hit $30 (thirty!) /barrel, Russia would start accummulating a capital surplus. I realize that in the last several years, Russia has begun spending a lot more of its oil boom revenue--but it is still interesting to note that even if oil "falls" from where it is now, in the $140 band--to $70--it is not like we are cutting off the gravy train--we'll just have lowered their superprofits.

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