Quote Originally Posted by Constitutionally Speaking View Post
They actually did not. They PROMISED to increase production. They have made these empty promises before and have not followed through. The market simply does not believe them anymore. Even if I am wrong and missed that they actually DID increase production, an increase of supply by that amount probably would not affect prices significantly anyway.

The KEY is that the cushion between supply and demand be enough to absorb any surprise interruption in supply. With demand out-pacing supply by 1 million barrels per day, we simply do not have that cushion. Production of oil needs to exceed demand by enough to accomplish an effective cushion. I could be wrong on the cushion needed, but finding that cushion is the key to stop the speculation.

This is not to say the falling dollar has nothing to do with it, but at it's core, the price of oil is Supply and Demand and the perception of what supply and demand will be in the future.
You're correct in that the Saudis have not yet started to pump the extra oil. The new targets are slated to go into effect on 01 July. However, I don't think you're correct in your assessment that the market doesn't believe them. I work on the Street a lot, though not in the commodities markets. Traders believe the Saudis, but they don't think that amount will affect their prices, as they see demand immediately exceeding any additional supply in those types of ranges (700k-2M).

That's why I contend there is no short term fix in terms of supply and demand. The real short-term fix is to get the dollar back to at least $1.25 to the Euro and you will see a significant drop in the price. That's also not to say that long term fixes, particularly nuclear and other alternatives, should not be initiated as well. However, I despair as to the existence of any politician with the vision and the courage to take those long-term measures.