OPEC to Keep Oil Prices Low to Discourage Alternative Fuel Use

This information was obtained from the National Ethanol Vehicle Coalition www.e85fuel.com.

OPEC announced late last week that they were planning on cutting oil production by 1.2 million barrels per day in hopes to keep costs of crude at about $60 per barrel. This cut is intended to bring the cost of gasoline up a bit but to keep it low enough so as to be more attractive than alternative fuel pricing.

“It’s unfortunate that OPEC feels that they can control the vision of this country and the destiny relative to alternative fuels,” exclaimed Curtis Donaldson, Chairman of the National Ethanol Vehicle Coalition.

OPEC expects to keep the price of gasoline at about $2.25 per gallon. According to a Foxnews.com news story on October 20 “OPEC’s cut also signaled that it would defend a price of about $60 a barrel, high enough to justify its investment in future production capacity but low enough to allow economic growth and deter a flood of alternative fuels.”

U.S. oil prices set a record high in July of this year topping at $78.40 a barrel and averaging record high fuel costs. Alternative fuel pricing, including E85, tended to be much lower during the summer, thus making them more attractive to consumers.

“OPEC feels that they can manage the price of gasoline to a point where increasing the production of E85 and providing it at more locations across the country will become less attractive. It will be disappointing if we allow this to happen when everyone knows, now more than ever, we need more energy independence,” added Donaldson.

According to an Automotive Fleet article (New York, October 20, 2006), Saudi Arabia’s Oil Minister supports OPEC’s decision to decrease production:

Saudi Support for OPEC Production Cut Triggers Rise in Oil Prices

Oil prices climbed above $58 a barrel yesterday after Saudi Arabia expressed support for an OPEC plan to cut production by 1 million barrels a day.
The proposed cut would begin Nov. 1, according to an AP report. OPEC ministers were meeting in Doha, Qatar to work out the details. This will be the first cut since December 2004. At that time, oil traded at just above $40 a barrel.
On Thursday, light sweet crude for November delivery climbed 99 cents to reach $58.64 a barrel in afternoon trading on the New York Mercantile Exchange, the AP reported.
Saudi Arabia’s support for OPEC’s plan to curb production was expressed Thursday by Ali Naimi, the country’s oil minister.


e85fuel.com, 2006-10-23, and Automotive Fleet, 2006-10-20.