OPEC - All Talk, No Action  

CNN money has a look at the gap between OPEC's words and actions when it comes to pmuping more oil - OPEC's empty toolkit .

In recent weeks, while Congress has been holding dozens of hearings to try to figure out who to blame for the rude price of crude, the Secretary-General and his colleague Chakib Khelil, the president of OPEC and head of Algeria's oil ministry, have offered a variety of explanations. Khelil has cited the falling value of the U.S. dollar, referenced tensions between the U.S. and Iran, and pointed the finger at hedge fund speculators. (It's hard to argue with the first two, but I generally side with my colleague Jon Birger in believing that it's bogus to blame speculators.) Saudi Arabia called an emergency oil summit last month, the main purpose of which seemed to be to get out the message that rising prices weren't the cartel's fault.

But it's disingenuous for OPEC's leadership to suggest that reduced production had nothing to do with rising prices. OPEC pumps 44% of the world's daily oil production and, by its own count, has 78% of the world's proven reserves. In an increasingly tight market, there's no room for the largest group of producers to drop its output without directly affecting prices. And indeed, in announcements before and during the summit, the Saudis pledged to boost production by some 500,000 barrels a day.

The scary thought - held by observers like peak oil guru Matt Simmons and commodities investor Jim Rogers - is that the cartel can't do much more than that because the easy oil is already out of the ground.

"They've been telling us for years that they have between two and three million barrels of [daily] spare capacity," says Gal Luft, the executive director of the Institute for the Analysis of Global Security. "If you have it and you don't use it then you are deliberately denying liquidity to the market when it needs it. If they have it, why don't they use it? And if they don't have it, we need to know that. We need to put more oil in our strategic reserve."

OPEC has apparently given its members the green light to pump all they want, according to a survey released by energy news service Platts last month. The Platts press release about the survey says that "OPEC has a 'tacit' understanding that those members capable of boosting crude production should supply as much oil as world oil markets needed."

In other words, the leaders of OPEC are trying to regain control of oil prices and offer relief to their agitated customers, although Platts Global Director of Oil John Kingston sounded skeptical about how successful OPEC could be. "It's clear that with non-OPEC output continuing to sag, and world demand staying flat regardless of high prices, that any additional supply most likely must come from OPEC," he is quoted as saying. "But...its ability to put much more oil on the market looks severely constrained."

Over the weekend, another important OPEC figure offered his thoughts on the price of oil. Venezuela's Hugo Chavez said on Sunday that crude is in a speculative bubble and that it might hit $200 per barrel. (He also took the opportunity to threaten to cut off supplies to the U.S. and drive the price up to $300 if Exxon didn't back off in a dispute over its assets in his country.)