Gas

OPEC's big gamble

The cartel is set to cut 1 million barrels of production but that may actually force prices lower in the long run.

By Steve Hargreaves, CNNMoney.com staff writer

October 11 2006: 6:29 PM EDT

NEW YORK (CNNMoney.com) -- If OPEC follows through on the talk that it will cut oil production by a million barrels a day, it will send a clear signal that the cartel feels the world can handle $60 oil.

But it could also undermine prices in the long run, energy experts said, by encouraging more conservation and investment in alternative energy.

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Furthermore, the cut by OPEC could actually come back and haunt the cartel later since it gives the world more of a cushion against further output disruptions in the future.

Initially, news of the planned cut last week sent prices rising back above $60 a barrel.

But prices have fallen back since then, to below $58 Wednesday, as OPEC ministers bicker over exactly which nations should cut how much, and when they will do it.

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But most analysts believe a cut is coming soon, and Qatar's oil minister told Reuters Wednesday that "there is no objection" and that it could happen within the next two or three days.

Analysts had long predicted OPEC would cut production if crude oil sank into the $50s, especially since autumn is typically a season of low demand. The decline has come as economic growth has slowed and supplies swelled to levels above or well above average for this time of year.

Analysts said the biggest reason OPEC, which currently