Thursday, March 10, 2011

Oil Prices And OPEC’s Responsibility

By Randa Takieddine
This commentary was published in al-Hayat on 09/03/2011
The massacre being committed by Gaddafi against his people and the ongoing war in his country, along with developments in the Arab world, in Egypt, Tunisia, Yemen, Bahrain and Oman, have raised oil prices to unjustifiable levels that have exceeded $110 a barrel.

According to everyone in the oil industry, oil is available in markets. Despite the continuing drop in Libyan production of about 500,000 barrels a day, European refineries are finding all of the oil they need in the markets. Saudi Arabia raised its production to over 9 million barrels a day and the rest of the OPEC countries are producing at their utmost capacity; these countries’ production exceeded by 2.6 million barrels a day the agreed-upon production quota.

Speculation in financial markets, geopolitical events, and people’s fears of shortfalls in energy supplies have enhanced the ability of speculators to invest in oil futures markets. Moreover, investment in stocks has incurred losses, as the dollar’s value continues to drop.

In OPEC, there are responsible countries, such as Saudi Arabia, Gulf countries and others, which believe that convening an extraordinary meeting might be useful, to show that OPEC is acting responsibly, and that it wants to calm oil markets, at least psychologically, because there is no shortfall in oil supplies. However, it might be positive to hold a meeting to let the world know about the additional quantities it wants to pump into markets, to reassure people that there is no cut-off in supplies.

However, countries such as Iran, Venezuela and the Libyan leadership, which continues to control oil production, do not want such a meeting, because they want more money to use in oppressing their people, and not improving the conditions of individual members of society. Iran, which produces more than 3.5 million barrels a day, uses this wealth to stoke strife and destabilize neighboring countries. The Iranian leadership is unconcerned with a deterioration in its economic conditions through any harsh international sanctions, and is content to achieve greater returns. Meanwhile, Gaddafi and his team are holding on, even though the freezing of their assets has encouraged some people to portray a false image of what is taking place in the country. It is said that Gaddafi tasked his oil minister, Shukri Ghanem, with bringing French journalists to Libya to meet with the colonel and relay his statements to the international media. Shukri Ghanem was an employee in the secretariat-general of OPEC in Vienna, where Gaddafi’s son, Saif al-Islam, submitted his doctoral thesis, written by Ghanem, on Libya’s economy. This is how Ghanem became prime minister, and then oil minister, as Saif al-Islam garnered the lion’s share - oil contracts would pass through him; a year ago, one of Saif al-Islam’s brothers was angry about this, and Gaddafi sidelined Ghanem for a period of time, on the pretext that he had received Italian citizenship. Ghanem then patched things up with the colonel, thanks to his son, Saif al-Islam. Gaddafi and his tribe continue to behave with Libya’s oil wealth as if it is their private property; they oppress and kill a people in revolt against a regime that has impoverished a state rich in natural resources and capabilities.

The Arab League and Arab countries have been slow to condemn Gaddafi’s massacres against his people, although the stance that had been awaited was finally taken. As for now, convening an OPEC conference will be useful to show the organization as a group of responsible countries that want to affirm that they do not want to destabilize the international economy. Also, they do not want to see an increase of poverty and despair in the world; they are keen to increase their production, so that there is no shortfall in oil.

The current problem is that a state like Iran is chairing OPEC for a one-year period, which makes joint action by the organization to reassure the world a difficult, if not impossible task, since it is headed by an irresponsible state.

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