Cooler heads behind steady Opec output

It always warms my heart to see organisations or businesses making sound, well-thought-out decisions in the face of a lot of utter madness.

A case in point is the Organisation of Petroleum Exporting Countries (Opec) decision to keep crude output steady, despite low prices that have to be hurting member countries.

While I'm sure everyone is feeling the pinch, especially nations like Venezuela and Iran, who based their national budgets on some pretty unrealistic price projections. I'm both happy and surprised that cooler heads, such as the Saudis, prevailed.

I'm sure the decision is at least partially based on that fact that Opec is still trying to get some members to comply with the last output cut, but it would have been an easy short-term decision to cut production in order to drive up crude prices.

But I have few doubts that such a move would have just put us all back on the oil price roller coaster, which would be especially dangerous in the midst of an ongoing worldwide economic downturn.

That some could see that lower crude prices now could keep demand from falling even further than it would if prices climbed is, in a word, encouraging.

Last week, I went back and read through news magazines from a year ago. Pundits were saying that the United States economy would be back on track by the end of the year, at most.

What is now a housing market debacle was pegged as a blip on the radar.

And, apparently, nobody saw Bernie Madoff coming.

Why did no one even remember Michael Milken? It was like the junk bond disaster in the 1980s had never happened. It was interesting and amusing to snicker at just how wrong the people in the know were, but the news was also a little terrifying in retrospect.

But this time, it appears at least Opec is paying close attention to history.

There is no question they remember the long-term fallout of the 1970s oil embargo, that drove countries into at least talking about energy independence, while squashing demand for crude flat as a pancake.

The price of a barrel of crude dropped from $80 at the height of the embargo to just $38 per barrel in the early 80s, when reduced demand -- due to that preceding price hike -- raked the bottom out from under prices.

Come on, don't those prices sound familiar?

Don't forget that the price hike also increased funding for alternative energy and jump-started Brazil's ongoing programme that turns sugarcane into ethanol. As a result, nations dependent on oil for income suffered painful budget woes and Opec ended up haemorrhaging money trying to regain its market share.

That at least one group is trying to avoid the economic disasters that have come before really is the silver lining in the economic thunderstorm.

I doesn't take to much work to see the parallels that Opec must be watching closely.

US President Barack Obama has made no secret that he wants to dump money into developing alternative energy sources, everyone from China to Europe is using less crude, demand is down and if the recession deepens further we can expect there will be even less clamoring for crude.

So Opec, congratulations on being one of the few cool heads in the economic world lately - and keep up the good work.

The writer is a freelance journalist based in Alaska, USA.