Should not US shale oil producers sit down with Opec to have a little conversation about mutual interest?

Sir, I refer to Roula Khalaf’s “A kingdom fit for an oil price ordeal” December 30. It refers to a battle, supposedly for market shares, between traditional oil and shale oil, in which Saudi Arabia in its own name, and fait accompli in the name of Opec, do no want to lose out one more barrel. We will see what happens.

That said to me it has been clear that even more than some weak Opec members might wish for a reduction in oil supplies that strengthens oil process, in order to help their fiscal accounts, so must most of the shale oil producers with their much higher extraction costs.

The fact is though that shale-oil extractors can probably not sit down and chat over production limits with Opec, because that would perhaps be regarded as a cartel… and we can’t have that with private companies, can we?

But at least Opec and shale oil extractors, as well as other oil sourcing countries, could have an interest to sit down and talk about what to do with all those taxmen who, for instance in Europe, by means of gas consumption taxes, are perceiving much higher revenues per barrel of oil than they are… and are of course helping to put a damper on the demand of oil...creating a demand deficiency. I mean, is not a tax collectors cartel just like any other cartel?

A Nobel prize-winner should not make such a statement

Sir Joseph Stiglitz and Linda Bilmes while defending their book The Three Trillion Dollar War (that I have not yet read) March 5 from some comments made by Tunku Varadarajan on March 3 say with respect to the price of oil “we attribute only $5-$10 to the war” and this is just a plain wrong statement, from a pure economic point of view.

All the terrain between the marginal extraction cost of oil and its market price is complete no mans land and so no one, not even a Nobel prize-winner, could therefore attribute any of it to any specific condition. If there is just one barrel of deficit in the supply, speculation and desperation could lead to any price; just like one barrel of surplus could start a movement towards equating the price of oil to its marginal cost.

That is why less than 9 years ago pundits predicted $5 per barrel of oil with the same ease other predicts $100 or more. That is why there is the extreme volatility in oil that wets the appetite of so many speculators. That is why it is impossible for me to understand why producers and consumers have yet not entered into long term production and take up contracts that could benefit them both.