Politics, oil and money. Anyone who doesn’t think that these three are so tightly bound that you would need a blowtorch and a crowbar just to get a drop of water between them, this is the story for you.

OPEC, the Organization of Petroleum Exporting Countries, has made a declaration of their own after a decision by the G20. The G20 said that they would continue worldwide stimulus payments, and because of that, OPEC has said that they will keep supply targets where they are. Their meeting Vienna happened almost at the same time and is an indicator as to how closely tied the world oil supply is to the global economy- a lesson to be considered as the Copenhagen Summit approaches.

The move by OPEC means that they will rely on stimulus money to keep the cost of oil steady rather than diminishing supply to raise prices per barrel- the cost per barrel is currently at $69. It has been predicted by traders that extended stimulus will mean higher fuel demand.

"There's no need to change output," an oil delegate told Reuters.

This makes me wonder what the reaction to Copenhagen will be by OPEC. How will a commitment by world powers to reduce greenhouse gas emissions affect the price of oil? Will they raise prices on petroleum exports, expecting the demand to go down, or will they lower the price to make it even more attractive in the coming decades before countries are expected to match those targets agreed upon at Copenhagen. Will OPEC be considered as a friend or foe in the economic puzzle that will be affected by the Copenhagen decisions? This remains to be seen.  

With the oil market recovering from a December low of $32.40/ barrel to a year-high of $75/ barrel last month- OPEC reduced the number of barrels put to market per day. They have a much higher inventory than is normally kept, meaning that they have flexibility around how much oil to put on the market.

"You can't say the price is too high. The E.U. and the U.S. aren't saying much different in terms of what they want," said Gary Ross, CEO of U.S.-based consultancy PIRA Energy. "OPEC's happy, everybody's happy, so why change it?" He added that oil prices would be much higher if OPEC had reduced their stocks the way they wanted. As it stands, they are relying on the stimulus for now and, by my read, will raise prices in accordance with private sector growth.

Ross expects… “corporate profit revisions for the third quarter.”

While there is a disconnect between the continued recession and unemployment numbers and the idea of raising profit expectations in the corporate sector, classic Reagan economics says that rising corporate profits means jobs and better pay for everyone in the workforce. In turn, that would mean higher prices for oil once everyone can afford it. OPEC seems to be taking the lesson of lower incomes, less sales to heart, playing the global political game of the stimulus, and biding their time. Fair enough.

With worldwide sentiment toward oil and fossil fuels growing negative and Copenhagen coming up there is little real sign of using less oil and petroleum products. Astute economic work, OPEC. We’ll see what transpires in January.