Group Claims OPEC Manages Oil Prices Against Renewable Fuel Competition

Oil nations decide to limit supply, but keep a wary eye on alternative fuel prices.

Oil prices topped $58 a barrel last week after Saudi Arabia agreed with the OPEC plan to cut production by 1 million barrels a day. Although the decision to limit supply will raise prices, if oil prices climb too high, it would allow alternative fuels to take hold in the U.S.

This summer, oil prices climbed as high as $78.40 a barrel in the U.S. Prices of alternative fuels such as E85 were often lower, helping their sales and making them a more viable alternative to oil.

Oil prices have since dropped, and although OPEC's plan to cut supply would raise prices closer to $60 a barrel, OPEC expects to keep prices low enough - at about $2.25 per gallon in the U.S. - to help stave off competition from alternative fuels.

The National Ethanol Vehicle Coalition expressed concern with OPEC's plan to keep oil prices lower than E85 and other renewable fuels. "OPEC feels that they can manage the price of gasoline to a point where increasing the production of E85 and providing it at more locations across the country will become less attractive. It will be disappointing if we allow this to happen when everyone knows, now more than ever, we need more energy independence," says NEVC Chairman Curtis Donaldson.

Current oil prices are comparable to October 2005 after this summer's record-setting highs.

According to several sources, including Foxnews.com and Gulf News of the United Arab Emirates, the decision to limit oil supply signals that OPEC intends to keep prices high enough to preserve future production capacity with growing markets in India and China, but low enough to allow economic growth.

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