By Bob Adelmann
With oil production from the Bakken formation in North Dakota now exceeding one million barrels a day and the Eagle Ford and Permian Basin oil fields in Texas producing more than three million barrels per day, prices for crude are dropping worldwide and pushing gasoline prices down along with them.
Crude oil prices on the New York Mercantile Exchange hit a 52-week low of $83.59 a barrel last Friday, while Lundberg just reported average prices for gasoline across the country have dropped to $3.26 per gallon. As recently as May 2, gas in the United States cost $3.72 a gallon.
In response to these falling prices, Saudi Arabia, the largest producer in OPEC, earlier this summer cut its production by 400,000 barrels per day. That did nothing to stem the decline in prices, and so, just last week, OPEC’s largest producer decided to recognize reality and unilaterally cut prices to its best customers, leaving its cartel members in disarray.
To add insult to this injury, Saudi Arabia then solicited long-term cut-price contracts with a number of its best customers in order to protect its own market share.
This was met by a decision by Iraq’s State Oil Marketing Company on Sunday to cut its price on its Basrah Light crude . . . .
This was too much for Venezuela and the country’s foreign minister, Rafael Ramirez, called for an urgent meeting to discuss strategy. That call was ignored, and plans remain in place for the regular cartel meeting scheduled . . .
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