Oil should be priced in Honest Money NOW.

The six members of the Gulf Cooperation Council (GCC) are Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.
They all peg their currencies to the US dollar.
Kuwait pegs its currency to a basket including the US dollar.
The five others only to the dollar.
Most of those five others seem to be in the process of de-pegging from the US dollar.
Of the six GCC-members, only Bahrain and Oman are NOT OPEC members.

The 6th summit of the leaders of the Developing-8 Muslim nations, also known as Group of Eight Islamic Developing Countries, and popularly known as the D-8, is being held from 4 to 8 July 2008 in Kuala Lumpur, Malaysia.
The theme of the summit is “Meeting Challenges Through Innovative Cooperation”.
The D-8 was set up in 1997 as an economic alliance with the objective of improving the position of Muslim developing countries in the global world economy through the diversification of their economies by creating new opportunities via increased trade relations.
Its eight members comprise Indonesia Bangladesh, Egypt, Iran, Nigeria, Malaysia, Pakistan and Turkey.
Iran and Nigeria are also OPEC members.
I understand Indonesia is no longer an OPEC member.

Rais Yatim, Malaysia’s foreign minister and D-8 chairman, was quoted by the Financial Times on Monday 7 July 2008 as having said on Sunday 6 July 2008 that the D-8 wanted the UN to lead efforts to bring down fuel prices because oil producers, particularly OPEC members, “do not seem to see the logic that by producing more oil they would reduce the price”.

TRUTH

Spontaneous logic is the order that the human intellect follows naturally in knowing reality.
For Thomas Aquinas, logic is the art that directs the reasoning process so that man may attain knowledge of the truth in an orderly way, with ease, and without error.

Logic teaches us that one of the assumptions missing in Yatim’s reasoning is that other prices in the economic system exist and remain unchanged.

Moreover, for the law of supply and demand to operate in the oil trade, the supply of oil must be exchanged through a medium of exchange for something the consumers of oil can offer to the suppliers, so that a price can be arrived at.
Supply and demand have to be meeting in a standard of value so that a price can be arrived at.

Oil is not being bartered on this planet (except perhaps by Venezuela).
Instead of barter, oil is being exchanged through trade.
The oil trade is being conducted with money,
money being a good that is readily accepted in a given geographical area and that is sought for the purpose of being re-exchanged.

At present supply and demand of oil are meeting in the US dollar, a currency which the inhabitants of this planet, outside of the USA, are more and more unwilling to hold and which they are thus not seeking (for the purpose of being re-exchanged).

Indeed, since 15 August 1971, when USA president Richard Nixon broke the Bretton Woods system, the US dollar has no value.
The dollar-regime is at present inflating the price of oil-wealth to such an extent that price inflation in the D-8 is three times as high as in the west.
Oil-speculators are therefore not interested in the possession of oil as wealth, but only in concluding wagers over the oil price in order to tap its monetary surplus value.

Hence, untapped oil reserves have, for oil producers, the same wealth-consolidating function as gold.

That’s why after de-pegging from the US dollar, the GCC states should not re-peg their currencies against a basket of world currencies but should allow their currencies to freely float, with their oil and gold reserves also freely floating but in the background.

In the meantime, if the D-8, with its OPEC members, Iran and Nigeria, really wants to bring down fuel prices, it should see the logic that oil producers, particularly OPEC members, will only be enticed to produce more oil if that which they receive in exchange for their oil-wealth has some value.
Why should they give their oil-wealth away for something which has no value?
To repeat, since 15 August 1971, when USA president Richard Nixon broke the Bretton Woods system, the US dollar has no value.

Oil should be priced in Honest Money NOW.

Ivo Cerckel
ivocerckel AT siquijor DOT ws