- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Saturday, December 4, 2021
CARACAS, Jun 27 2008 (IPS) - By bringing together the world’s major oil producers and consumers in Jeddah, Saudi Arabia marked a turning point in the negotiations for a new global energy order that is emerging under the weight of soaring oil prices, which are driven by factors other than supply and demand.
“It could be asked whether the 140 dollars per barrel price can be negotiated between OPEC (Organisation of Petroleum Exporting Countries), the new actor, which is global capital, and the governments of the Group of Eight (industrial powers),” Víctor Poleo, a Venezuelan professor of graduate studies in the oil economy, commented to IPS.
On Thursday, crude oil prices broke through the 140-dollar a barrel barrier for the first time.
The price of oil “can no longer be dictated by OPEC, because a significant portion of the price would seem to obey market laws that are not its own,” said Poleo.
Saudi Arabia perceives “the beginning of a transition stage to a new power order in the world energy system,” he added.
In Poleo’s view, “the global energy system is witnessing the emergence of a new order. In the old one, under OPEC, the level of prices hovered around 70 dollars a barrel; in the new system, the increase is of the same magnitude,” and the decisions taken by Saudi Arabia “form part of the new negotiations.”
Producer and consumer nations and companies will meet again in Madrid next week, at the 19th World Petroleum Congress, and in late 2008 in London.
Spain’s Minister of Trade and Industry Miguel Sebastián said that “after enjoying 15 years of low prices, our economies have become addicted to oil, and the world is not prepared for the challenge of a steady rise in prices.”
“Nature has been generous with the members of OPEC,” said the minister, “but that gift implies responsibility with respect to the global economy,” and they must improve their offer, while industrialised countries “should carry out an in-depth reform of the commodity markets to avoid speculative bubbles.”
OPEC is made up of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela, which account for over 75 per cent of global proven oil reserves.
Referring to the Jeddah meet, the Caracas newspaper El Nacional pointed out that the “father of OPEC”, Venezuelan lawyer Juan Pablo Pérez Alfonzo, proposed half a century ago the creation of an organisation of producers and consumers that would regulate the world oil market.
The corporations that controlled the oil business, known back then as the “seven sisters”, scorned the proposal, and Saudi Arabia, Iran, Iraq, Kuwait and Venezuela went on to found OPEC in 1960 in Baghdad.
At the time, Venezuela was the world’s leading oil exporter, a position that was taken over and has been held for decades by Saudi Arabia, which sent from Jeddah a message to its fellow OPEC members that it will not favour a rise in prices, as indicated by its unilateral decision to boost output from 9.5 to 9.7 million barrels a day as of July.
Perhaps for that reason, to show that Riyadh is not the only voice within the oil cartel, Algerian Oil Minister and OPEC President Chekib Khelil said in Europe that oil prices were likely to reach 150 to 170 dollars a barrel this summer.
But if, for example, the crisis over Iran’s nuclear programme leads to a suspension of that country’s oil production, which currently stands at 4.4 million barrels a day, there would be serious shortages and prices could climb to 300 or 400 dollars, said Khelil.
Meanwhile, Shokri Ghanem, the head of Libya’s National Oil Corporation, said his country was studying the possibility of cutting output to protest a bill under debate in the U.S. Congress that would empower the Justice Department to sue OPEC members for limiting oil supplies.
“We are studying all the options,” he said. “There are threats from the Congress and they are taking OPEC to court, extending the jurisdiction of the U.S. outside” that country’s borders.
Libya is also fighting a U.S. law that allows the families of victims of state-sponsored terrorism to go to court and seek the seizure, as punitive damages and compensation, of any asset owned by the terrorist-sponsoring country, or of money from those governments that is held by U.S. companies doing business with them.
These remarks pushed prices up to a record high above 142 dollars a barrel by Friday. Although Libya only produces 1.8 million barrels a day, equivalent to two percent of global demand, every barrel matters when it comes to price fluctuations.
OPEC Secretary General Abdalla Salem el-Badri said the organisation planned to invest 160 billion dollars over the next five years to raise production by five million barrels a day.
The members presently pump 32 million barrels a day, while global demand amounts to 86 million barrels.
Venezuelan expert Pablo Hernández Parra says the world will need more than 92 million barrels a day by early next decade, of which OPEC will not be able to provide more than 38 million barrels, while the rest of the world’s producers will provide around 49 million.
OPEC will not be able to fill the shortfall of several million barrels a day, because it has falsified data on its members’ oil reserves and capacity to expand production. “The only solution is a new association aimed at reducing current energy consumption and preserving what is left of the environment,” said Hernández Parra.
U.S. economist Joseph Stiglitz, winner of the 2001 Nobel Prize for economics, wrote earlier this month that “Only new patterns of consumption and production – a new economic model – can address that most fundamental resource problem.
“Two factors set off today’s crisis: the Iraq war contributed to the run up in oil prices, including through increased instability in the Middle East, the low cost provider of oil, while biofuels have meant that food and energy markets are increasingly integrated,” he added.
“America’s subsidies for corn-based ethanol contribute more to the coffers of ethanol producers than they do to curtailing global warming,” he complained, after arguing that “rich countries must reduce, if not eliminate, distortional agriculture and energy policies, and help those in the poorest countries improve their capacity to produce food.”
For poor countries, the steady rise in oil prices has taken on nightmare proportions. At the start of the Jeddah meeting, Saudi Arabia’s King Abdullah suggested that OPEC create a one billion dollar fund to compensate poor countries for the rising price of oil.
The situation in Latin America was illustrated by Dominican Finance Minister Vicente Bengoa, who said that “in 2004, the oil bill was covered by the remittances sent home from Dominicans abroad, with 560 million dollars left over, while this year remittances are expected to run to 1.9 billion dollars, compared to an oil bill of 4.5 billion.”
The big oil companies, in the meantime, are raking in tens of billions of dollars each. With these profits, said Poleo, global capital is financing its positioning with regard to the shifts occurring in the global energy scenario.
The price bubble continues to swell, to the benefit of these interests, although analysts like Alexander Green, investment director at the Oxford Club, a private, international network of investors, say oil prices will inevitably come down.
“Yes, speculative fever has gripped the oil market. This bull is likely to end up just like those in the ring in Mexico City. Current oil prices are simply unsustainable,” Green wrote recently.
“That doesn’t mean that oil is going to plunge today or tomorrow. Indeed, it could keep rising for quite some time. After all, you cannot make a rational judgment about when irrational behaviour will end.
But oil prices will come back down. And that will be positive for both the economy and the stock market,” he concludes.
IPS is an international communication institution with a global news agency at its core,
raising the voices of the South
and civil society on issues of development, globalisation, human rights and the environment
Copyright © 2021 IPS-Inter Press Service. All rights reserved. - Terms & Conditions
You have the Power to Make a Difference
Would you consider a $20.00 contribution today that will help to keep the IPS news wire active? Your contribution will make a huge difference.