How will the oil supply cut trickle down?

December 17, 2008

The Organisation of the Petroleum Exporting Countries agreed on Wednesday to make its deepest output cut ever to counter slumping demand and falling oil prices.  The output cut has been received with cautious optimism by analysts.

Some say that the price of oil will fall further, while others say $40 a barrel was the lowest it will go.

“If you look at the market, prices are going up immediately,” Frank Schallenberger, head of commodity research at Landesbank. “I really think this is the end of a bear market. $40 was the bottom.”

However, the White House called to the historic cut “short-sighted” and said the oil cartel has an obligation to keep the market well-supplied.

“It’s not clear that OPEC’s actions will be effective given the shift in global demand and the ability of OPEC members to meet the cartel’s targets,” White House spokesman Tony Fratto said.

What do you think? Will the price of oil continue to drop or will it recover?

Beyond an increased cost at the petrol pump, how will the oil supply cut trickle down to the consumer in terms of cost?

How will this action affect the overall economy?

One comment

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The oil cut seems, like so many other things to do with economic stimulus, a contentious issue. Cutting the price seems not to have much of an affect at all.

Posted by Jeanine Moreau | Report as abusive