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Indonesia Mulls Quitting OPEC; Oil Prices Leap Past $122 a Barrel

BY Admin  May 6, 2008 at 2:30 PM EST

Woman at a gasoline pump

Meanwhile, oil futures on Tuesday shot up to a record high of more than $122 a barrel. A new Goldman Sachs prediction said oil prices could rise even further to $150 to $200 within two years, though other analysts said the prices could fall just as easily.

In a nationally televised speech, Yudhoyono said, “Our wells are drying up,” and that the country needs to focus on increasing domestic oil production, which has dipped to less than 1 million barrels per day, according to the Associated Press.

Indonesia has been a member of OPEC since 1962, and has re-evaluated its membership in the past. But teams commissioned by the government have always recommended it stay in order to maintain good relations with other OPEC nations, particularly those in the Middle East.

OPEC has 13 members and was first formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.

If Indonesia decides to leave, it would do so next year since it has paid dues to OPEC through 2008, said Minister of Energy and Mineral Resources Purnomo Yusgiantoro, reported the AP.

The government also is considering raising domestic fuel prices by up to 30 percent to avoid a budget shortfall amid the skyrocketing cost of oil on the global market.

As for oil prices, light, sweet crude for June delivery set a record of $122.47 per barrel before retreating slightly to trade up $1.29 at $122.26 on the New York Mercantile Exchange, according to the AP.

Oil prices have nearly doubled from about $62 a year ago, and Goldman Sachs reported this week that it expects that trend to continue. Analyst Arjun Murti said prices could ultimately force demand to fall sharply.

But another analyst, Tim Evans from Citigroup Inc., countered that prediction, saying crude prices could just as easily fall to $40 a barrel as rise to $200 over the next two years because, he said, supplies are comfortable, reported the AP.

Various factors have helped increase oil prices, such as supply disruptions in Nigeria, caused by a strike and attacks by militants; tensions with Iran, the world’s fourth-biggest oil producer; and the declining U.S. dollar, which often drives investors to buy commodities such as oil as a hedge against inflation.

U.S. President Bush has called on OPEC to raise output to help lower prices. He is expected to talk with Saudi Arabian officials about the effects of high fuel prices on the U.S. economy during his trip there later this month, Reuters reported.

But even as oil futures rose to new heights, the national average price of a gallon of regular gasoline slipped 0.1 cent overnight to $3.61, according to AAA and the Oil Price Information Service, cited the AP. And analysts are split over whether the slipping in prices since May 1 means gas is close to peaking or whether fuel will follow oil’s upward trend.