OPEC is having problems. Awww...

The International Herald Tribune has the story by Jad Mouawad:

Over the summer, the OPEC cartel couldn't prevent oil prices from surging to record levels even when its members pumped full out. Now, the producers seem equally unable to stop prices from collapsing as the global economy cools down. Members of the Organization of the Petroleum Exporting Countries left an informal meeting in Cairo this weekend without an agreement to reduce production, but with rising doubts about fraying discipline and tensions within the group that accounts for 40 percent of the world's oil exports.
So, great uncertainty still looms over the market. Have producers managed to draw a line in the sand, or will oil prices keep falling in coming months?
After topping $147 a barrel in July, prices have slipped by more than $90 because of lower economic growth around the world. Prices could keep falling next year, analysts say, with some predicting new lows of around $30 a barrel. On Friday, oil futures in New York closed at $54.43 a barrel, having dropped on Nov. 20-21 below $50 - their lowest in more than three years. The cartel said it would consider reducing production when it meets in Algeria next month.
OPEC members need prices between $60 and $90 a barrel to balance their budgets, so the prospect of lower prices and crimped revenues is daunting. Even Saudi Arabia indicated over the weekend that it considered $75 a barrel to be a "fair price," a far higher figure than most analysts expected from the kingdom.
As the Cairo meeting this weekend illustrated, there are unmistakable signs that the group is struggling to maintain its unity. "It is at times when the organization is under pressure that its cohesion is tested," said Raad Alkadiri, an energy expert at PFC Energy, a consulting firm, who was in Cairo during the meeting. "Right now, there is a sense it's not in the driving seat."
The oil market has gone full circle at an astonishing speed. Prices have now returned to their level in 2002 levels, before demand spiked, production outside of OPEC disappointed, and investors flocked to commodities believing the market would only rise. Global growth, the biggest factor for oil demand, is under severe stress, new supplies are coming on the market, oil inventories are brimming, and investors are fleeing commodities.
In the United States alone, oil demand plunged by 2.6 million barrels a day in September, or nearly 13 percent, according to monthly data released last week by the US Energy Department. Demand reached 17.7 million barrels a day, the lowest monthly level since October 1995. Overall global oil consumption could drop for the first time in 25 years this year and may not recover before 2011, according to analysts. Some analysts say OPEC needs to cut output by at least three million barrels a day to make up for declining demand in industrialized nations.
Meanwhile the credit crisis is hurting the ability of producers to finance new developments, and crimping high-cost producers such as tar sands or deep water offshore, who need prices between $60 and $80 a barrel to be viable. This means supplies could be affected as oil companies cut back their investment spending. If prices keep falling, some existing fields could also become uneconomical, and might be forced to shut down.
Behind its façade, the cartel is facing its toughest test in years. The meeting, which was billed as an informal consultation rather than an official event, failed to resolve deep-seated issues such as how much each country is currently pumping and to what degree they should reduce production. Instead, producers tried to stay on message.
"OPEC is united," said Shukri Ghanem, the Libyan oil minister, as he sped out of the meeting Saturday without slowing down for questions, his words echoing through the vast lobby of the Intercontinental Hotel. But there were signs of tensions. The Gulf states, led by Saudi Arabia, are unwilling to approve further supply reductions before other members of the cartel - particularly Iran and Venezuela - follow through on previous commitments to cut output.
Analysts said the Saudis wanted to show other members of the cartel just how serious they were about sharing the burden between all producers. But even as the Saudis appear ready to play hardball, with the risk of pushing down prices further, OPEC is also laying the grounds for a more coordinated approach with other producers. The OPEC secretary general, Abdalla El-Badri, has asked producers outside of the cartel, such Russia, Mexico, and Norway, to restrain their own supplies to prop up prices, as some of them did in the late 1990s when prices slumped below $10 a barrel. These countries will attend the group's next meeting in Algeria. "Our concern is about overproduction," said Abdullah Al-Attiyah, Qatar's energy minister. "If you're producing oil and no one is buying it, this is the concern."

Rico says it looks like a lot of 'after you, Alphonse', with everyone wanting to be the last one to cut production. (And couldn't happen to a nicer bunch of guys.) Rico is doing his part, of course, since he doesn't drive at all...