Ivo Cerckel

OPEC Will Assure Oil Prices Stay in a Reasonable Range

TRUTH AND THE HUMAN PSYCHE

What is it that prevents the human mind to acknowledge the Truth when it discerns/sees the Truth?

Truth is ad-equation between the thing and the intellect, said Thomas Aquinas. (1)

In Saudi Arabia, inflation is at quarter-century high because the country pegs its riyal to the weak US dollar. (2)

As a result of Bush’s pleas to Saudi Arabia for OPEC, the Organisation of Petroleum Exporting Countries, to lift its production ceiling
in order to bring down the price a oil which is now hovering at around 100 US dollar a barrel,
the Saudis seem to have adopted the “a friend in need is a pest” attitude. (3)

Why can’t observers conclude from this
that Saudi Arabia should de-peg the riyal from the US dollar
and
that OPEC should price its oil in another currency than the US dollar?

What is that prevents the mind from ad-equating itself to these facts?

Is it that, as Aristotle writes,
when human intelligence is confronted with the highest truths,
it is in the same situation as the bat who is dazzled by the light of the sun?

And guess what?

Former Federal Reserve Chairman Alan Greenspan said on Monday in Jeddah, Saudi Arabia's second-largest city, that dropping the Gulf dollar peg would ease inflation. (4)

Hence,
the Gulf Cooperation Council (GCC) foreign ministers are to meet on Saturday, March 5, to discuss continuing pegging their currencies to the dollar (5),
the next OPEC meeting being scheduled for Wednesday, March 5

Meanwhile,
the Iranian Oil Bourse opened on Sunday February 17.

The mystery concerning the Bourse remains however complete.

Indeed, we do not know in which currency oil is being traded on the Bourse.
Some sources say it’s the Iranian rial.
Others say indeed it’s the Russian ruble. (6)
Hence the importance of this Friday 21, 2008 International Herald Tribune-article.

Moscow deepens ties to Iran's energy sector (7)
SNIP
DUBAI: As the United States warns the world away from business with Tehran, Moscow is deepening its ties to Iran's energy sector, underscoring Russia's differences with Washington over Iranian nuclear plans and Kosovo's independence

What if it was gold
(which is no longer available in Fort Knox,
but is marked to market on a quarterly basis by the European Central Bank)?

Gold left last week for da moon!

We watch this new gold market together, yes?
Thank You
Another
6/29/98 ANOTHER (THOUGHTS!) (8)

Here’s a February 20 article of the Iranian News Agency which says
that Iran's Oil Exchange Market, which I suppose is not to be confused with the Iranian Oil Bourse, will be inaugurated on Wednesday February 27
and
that oil dealings on that Market will be based on euro or Iranian rial (9),
thus not based on ruble.

Still watching …

Ivo Cerckel

ivocerckel AT siquijor DOT ws
blogs.siliconindia.com.../


ENDNOTES

(1)
Conformity, con-FORM-ity, concerns only the form.
Ad-equation says that not only form,
but also the matter/substance/conte... of both the thing and the intellect must equalize.

(2)
Saudi inflation at quarter-century high
Dubai: Sat, 23 Feb 2008
www.tradearabia.com/NE...
SNIP
Saudi inflation hit 7 per cent in January, its highest level in more than a quarter century, as rents and food costs spurred price rises in the world's largest oil exporter for a ninth straight month.
Saudi Arabia has been grappling with inflationary pressures as the economy, the largest in the Arab world, booms on a near five-fold rise in oil prices since 2002 and because it pegs its riyal to the weak US dollar, pushing up some import costs.

(3)
From The Sunday Times
February 24, 2008
Sun shines on some as storm clouds gather over US economy
American Account
Irwin Stelzer
business.timesonline.c...
SNIP
Most important of all, Opec, which accounts for about 40% of world output, refuses to lift its production ceiling, despite personal pleas to the Saudis from Bush. The Saudis seem to have adopted the “a friend in need is a pest” attitude. Opec fears an economic slowdown will cut into demand, and that the dollar will fall further, reducing the purchasing power its cartel members receive in return for their oil.

(4)
Greenspan: Dropping Gulf Dollar Peg Would Ease Inflation
Monday, Feb. 25, 2008
JEDDAH/ABU DHABI
moneynews.newsmax.com/...
Former Federal Reserve Chairman Alan Greenspan said on Monday near-record Gulf Arab inflation would fall "significantly" were the oil producers to drop their dollar pegs, in contradiction to Saudi policy.
+
Saudi and UAE central bank chiefs spoke in favour on Monday of retaining dollar pegs, while QATAR's prime minister advocated regional currency reform to avert possible unilateral revaluations designed to curb inflation.

(5)
GCC foreign ministers council to meet Saturday
www.kuna.net.kw/home/S...
RIYADH, Feb 25 (KUNA) -- The ministerial council of Gulf Cooperation Council (GCC) foreign ministers will hold their 106 meeting in the Saudi capital, Riyadh, under QATAR's chairmanship on Saturday March 1.
In a press statement on Monday, GCC Secretary-General Abdulrahman Al-Attiyah said this meeting held much significance as it will take place after the 28th GCC Leaders Summit in Doha which included announcing the establishment of the GCC's common market.
While saying discussions will include regional and international developments, he added that the meeting's sidelines will include a forum between GCC foreign ministers with their Yemenite counterpart as part of supporting development projects in Yemen. (end) ay.
ayh

(6)
Russian ruble could be used in oil trade deals in Iran - envoy
15:30 | 15/ 02/ 2008
en.rian.ru/world/20080...
MOSCOW, February 15 (RIA Novosti) - The Russian ruble could be used as a payment instrument for deals on an Iranian oil exchange, the Islamic Republic's ambassador to Moscow said on Friday.
"Possibly in the future, we'll be able to use the ruble, Russia's national currency, in our operations," Gholamreza Ansari said, adding that the Islamic Republic was currently busy launching a new oil trade exchange.
The Islamic Republic's oil minister, Gholam-Hossein Nozari, earlier said that Iran would launch on February 27 a commodities exchange for oil, petrochemicals and natural gas on the Persian Gulf island of Kish and that all financial settlements would be made in Iran's national currency, the rial.

(7)
Moscow deepens ties to Iran's energy sector
By Simon Webb and Amie Ferris-Rotman Reuters
Published: February 21, 2008
www.iht.com/articles/2...
DUBAI: As the United States warns the world away from business with Tehran, Moscow is deepening its ties to Iran's energy sector, underscoring Russia's differences with Washington over Iranian nuclear plans and Kosovo's independence

(8)
www.usagold.com/goldtr...

(9)
Russian expert says oil dealings in Iranian Oil Exchange Market soon
Moscow, Feb 20, IRNA
www2.irna.ir/en/news/v...
Head of Iran Contemporary Studies Center in Russia Rajab Safarov says in the coming months, Iran wants to privatize its oil companies, whose number is no more than 40, and start oil deals in Iran's Oil Exchange Market.
Safarov told Moscow-based daily Vermianovesti that Iran's Oil Exchange is a crucial body that is expected to leave a drastic impact on the world oil market.
He said in the market, oil dealings will be based on euro or Iranian rial.
+
Vermianovosti said Iran will inaugurate its Oil Exchange market on February 27.
It quoted Iranian Oil Minister Gholam-Hossein Nozari as saying the exchanges will be in rial and possibly euro and the Exchange will be located in Kish island in Persian Gulf.

David Woo Defends the Oil Price Denomination Fallacy

ENDNOTES

(1)
“Losing faith in the greenback”, The Economist, December 01, 2007. 77, p. 78

(2)
Time to replace the US dollar as default reserve currency
..local consultant calls for new monetary standard
By Raffiqe Shah
Trinidad and Tobago Express
Wednesday, December 5th 2007
www.trinidadexpress.co...

(3)
That old stagflation dilemma again
By Samuel Brittan
Financial Times, December 6 2007 19:33 | Last updated: December 6 2007 19:33
www.ft.com/cms/s/0/b9f...

(4)
UAE could cut rates further
By Ahmed A. Elewa, Staff Reporter
Gulf News: December 06, 2007, 21:21
www.gulfnews.com/busin...
Abu Dhabi: The UAE Central Bank will continue to cut interest rates further, in line with the US Federal Reserve's moves, following the latest rate cut, a senior official said.

(5)
Peg will stay, but GCC leaves doors open
By Barbara Bibbo'Correspondent
Gulf News, December 05, 2007, 00:09
archive.gulfnews.com/a...

(6)
No need for revaluation - Al Suwaidi
Reuters
Published: December 05, 2007, 23:14
www.gulfnews.com/busin...
Frankfurt: The UAE central bank said yesterday it would leave its dollar peg unchanged for the "foreseeable future" after Gulf rulers agreed to KEEP
any currency reform talks SECRET to calm markets.

(7)
Iran gets over 85 pct oil income in non-US currencies
TEHRAN, Oct 2 (Reuters)
uk.reuters.com/article...

(8)
en.wikipedia.org/wiki/...
Iran is planning to open a commodity exchange, variously referred to as the Iran Petroleum Exchange, International Oil Bourse or Iranian Oil Bourse.
+
The exchange has not yet opened, having missed at least three announced opening dates.
Although opening an oil bourse has so far been unsuccessful, Iran has had success in asking its
petroleum customers to pay in non-dollar currencies. As of October 3, 2007, Iran currently receives non-dollar currencies for 85% of its oil exports with euros composing 65% and yen 20%. Iran is currently planning on moving the remaining 15% of dollar denominated oil exports to other currencies such as the United Arab Emirates dirham.

(9)
Iran: Why does Bush invoke the threat of World War III?
Part 3: Globalization, Iran, and the dollar crisis
By Alex Lantier
3 December 2007
www.wsws.org/articles/...

(10)
Ahmadinejad proposes formation of OPEC bourse
Riyadh, Nov 18, IRNA
Iran-Saudi Arabia-Ahmadinejad
www2.irna.ir/en/news/v...
SNIPS
President Mahmoud Ahmadinejad said on Sunday that devaluation of US dollar has left negative impacts on OPEC and global economy.
+
The Iranian president called for drawing up of a comprehensive plan for OPEC and establishment of an specialized bank called "OPEC Bank" to safeguard the hard currencies of OPEC member states.

David Woo Defends the Oil Price Denomination Fallacy

"Check your premises. Contradictions cannot exist", said Ayn Rand.

I cannot read the contracts, so I don’t have all the premises for my judgement.

In such an environment, I can only continue to follow the movements of the troika of euro/dollar, gold and oil to determine whether something has fundamentally changed (in fact) which, the change, would then be made official later.

Felix is saying that if the chances of oil being denominated in anything other than dollars are slim, then the chances of the dollar losing its reference-currency status in world trade more generally are infinitesimal.
The quoted article from The Economist says that the dollar has lost its status as a store of value
- at least, recently.

The idea that there is some safer haven basket of currencies that stands as a viable and sustainable alternative to US Dollar exclusivity is however largely wishful thinking, says Georealist.

So we face …

Ivo Cerckel
ivocerckel AT squijor DOT ws

David Woo Defends the Oil Price Denomination Fallacy

“Is this commitment to the dollar peg a good or bad decision, keeping in mind the increased revenue from higher energy prices for the region?”, Gulf News asked its readers earlier this week. (5)

The problem is that we don’t know in what currency oil is being traded. We don’t know the currency in which oil contracts say they should be settled.

The reason is that the Gulf rulers agreed at the GCC Summit to KEEP any currency reform talks SECRET to calm markets. (6)

Iran, which was invited at the GCC Summit, is said to obtain already 85% of its oil revenues in euro. (7)

The Iranian Oil Bourse (IOB) which would sell oil in non-dollar currencies, mainly the euro, was supposed to have opened in March 2006, among other dates.

Wikipedia says the IOB has not yet opened. (8)

Alex Lantier said earlier this week that the IOB had opened in March 2006 which explains why the dollar is collapsing. (9)

On 30 November 2007, I wrote on my blog
blogs.siliconindia.com...
under "Exit doors to rupee appreciation"
that Iranian President Ahmadinejad had proposed the
creation of an Oil Bourse by OPEC at the OPEC Summit in Riyadh on November !7 and 18 2007. (10)

This OPEC Bourse should not to be confused with the OPEC Bank.

Whether the OPEC Oil Bourse should be confused with the Iranian Oil Bourse, I don’t know.

David Woo Defends the Oil Price Denomination Fallacy

David Woo says that the fact that the dollar is the main transactional currency for global trade means that the world has to maintain minimum dollar balances to facilitate international payments.

Felix is saying that if the chances of oil being denominated in anything other than dollars are slim, then the chances of the dollar losing its reference-currency status in world trade more generally are infinitesimal.

Both of you are forgetting that,
as Asia has surpluses,
while the US of A has deficits,
Asian central banks have to accumulate dollars in order to prevent their currencies from going through the roof.

Both of you are also failing to distinguish between the dollar as an international means of exchange and the dollar as a reserve currency.
Reserves are held to buttress confidence in a currency, not as a float to global trading. As a backstop, reserves need to be easily convertible (so they can be used as an emergency source of liquidity) and a store of value, The dollar, with its large and liquid capital markets, meets the first criterion even if it has failed the second - at least, recently. Thus spake the December, 1st, 2007 The Economist. (1)

The December 5, 2007, Trinidad and Tobago Express, which was also confusing this distinction between the dollar as an international means of exchange and the dollar as a reserve currency, reminded us that the US is only the reserve currency BY DEFAULT. (2) A challenger, the euro, has however arisen.

Writing in December 07, 2007, Financial Times, Samuel Britan says that
the long-term stability of the late 19th century was not, of course, due to government measures but was the semi-automatic effect of the international gold standard. (3)

After the Gulf Cooperation Council (GCC) at its Summit earlier this week decided to keep the currencies of its members pegged to the US of A dollar, Gulf News newspaper says this Friday morning that the United Arab Emirates (UAE) Central Bank will continue to cut interest rates further, in line with the US Federal Reserve's moves, following the latest rate cut. (4)