With the global economy expected to ease and bring an increase in demand for fuel, the Organization of the Petroleum Exporting Countries said Thursday it was leaving its target of oil production unchanged.
OPEC has announced production cuts of about 4.2 million barrels a day since last fall in an effort to shore up prices. Often those OPEC cuts are ignored by cartel members but this time the line held enough so that 80 percent of the cut was achieved. That represents about 5 percent of the global demand for oil.
The reduction in production initially showed little price-support success as the worldwide recession deepened and demand fell, dropping the price of oil to the mid $30s per barrel through the winter. This was after the record run up to $147 a barrel last July and the resulting $4 a gallon gasoline pump price in the United States.
However, in recent months, oil prices have been climbing. The price has rebounded to $63.67 a barrel Thursday.
That isn't enough for the leaders of Saudi Arabia, the world's largest single oil producer and exporter and the swing production nation with more power over global oil prices than any other country. Saudi leaders have set a price of $75-$80 a barrel as their target and that, while substantially less than prices a year ago, is about 20 percent higher than current trading figures.
Optimists in the United States argue that President Barack Obama's policies have been restoring confidence and showing the way out of the great recession -- easily the worst economic contraction the United States has suffered since the Great Depression more than three-quarters of a century ago.
It's true that Wall Street share indexes have recovered somewhat from their record lows but the U.S. economy continues to hemorrhage jobs at a rate unprecedented since the 1930s and there are growing worries that Obama's $3.5 trillion budget and $787 billion economic stimulus package will inexorably lead to a ruinous inflation that would be at the very least the worst since the 1970s.
Here are other reasons why oil prices have been rising: China has been moving energetically to stockpile large supplies of oil. This may indicate that the Beijing government either fears a Middle East crisis, most likely over Iran, is imminent or that it fears a far greater economic dislocation may be coming and wants to use its vast reserves of hard currency to buy as large a cushion of oil supplies as it can.
The coming Iranian presidential election casts another shadow of uncertainty over global oil prices and Middle East stability. President Mahmoud Ahmadinejad is running for re-election against former Prime Minister Mir-Hossein Mousavi Khameneh, who was a hard-liner but is now the standard-bearer for a faction that is more moderate than Ahmadinejad's.
OPEC's attempts to raise oil prices above their current levels would not ordinarily be a threat to the global economy. However, the times are not ordinary by any means. It remains to be seen whether the trend will deal a damaging blow to the still-fragile green shoots of recovery in the United States and elsewhere.
The timing of the move is also significant as it comes only a few days before Obama visits the Middle East. Obama had hoped to focus his trip on his efforts to woo the Arab and wider Muslim world and on his initiative to resolve the long Israeli-Palestinian peace process. But OPEC's efforts ensure that oil prices are going to extend their shadow over his travels as well.