This commentary was published in al-Hayat on 18/05/2011
Two important developments in Iran and Libya are raising questions about what the 8 June OPEC ministerial conference in Vienna will look like. Iran's President, Mahmoud Ahmadinejad, fired his oil minister and announced that he would take over the management of oil matters in his country after this move. Iran is chairing OPEC for one year, and nothing can prevent Ahmadinejad from taking the decision to chair this conference in Vienna, if he of course decides to travel there to take part.
While this is unlikely, it is worrying, since Ahmadinejad is responsible for the deterioration of the economic situation in his oil- and gas-rich country, which is suffering from stringent international sanctions that have led to a huge drop in the living standards of his people. The other development that raises questions about the Vienna OPEC conference is the situation in Libya, and how OPEC states will deal it. There were reports yesterday about the defection of Libya's oil minister, Shukri Ghanem, who is seen as a supporter of Saif al-Din Gaddafi, Moammar Gaddafi's son. Who will represent Libya at the OPEC conference, and will Gaddafi send a delegate to the conference, with the Libyan opposition, i.e. the Transitional Council, sending one as well? What will be the OPEC ministers' response?
The date of the conference is approaching and these problems have yet to be solved, and although Ahmadinejad's general policy is worrying in the Middle East and the world, especially in his country and toward his people, OPEC has been able to endure phases that were more dangerous than the present one.
OPEC experienced the First Gulf War between Iraq and Iran, and survived, thanks to Saudi Arabia, whose surplus production capacities were able to supply markets with the quantities of oil that disappeared during this conflict. Then, there came Saddam Hussein's invasion of Kuwait, and the burning of Kuwaiti oil fields, with all of the consequences this had for Kuwait's production and its exports, along with the sanctions on Iraq. Here also, Saudi Arabia's excess production was the savior of international consumption, because it alone among OPEC countries has the extra oil production capacity to compensate for any shortfalls.
Then came the US war on Iraq, which resulted in destruction and the stoppage of Iraqi oil production for a long period of time. It was necessary to compensate for the shortfall in Iraqi oil from the markets. Saudi Arabia demonstrated its high level of responsibility in acting to secure the stability of markets and increase its oil production, so that prices would not have a negative effect on the international economy.
Today, oil prices have retreated a bit, although they remain higher than $100 a barrel. All OPEC countries are producing at their utmost capacities, with the exception of Saudi Arabia, which has around 2 million barrels a day in excess production that it constantly maintains, to make up for any shortfall, if there is a need to do so.
Despite the absence of around 1 million barrels a day from Libya, and some oil from Yemen, considered a small exporter with 300,000 barrels a day, oil markets have remained sated, with no imbalance in supply and demand. The rise of oil prices, followed by a slight retreat, resulted from speculation by investors in financial markets, which wager on fears of political developments, fluctuations and revolutions in the Arab world.
The oil policy of Saudi Arabia, the world's biggest exporter and the leading country in OPEC, represents a guarantee of stability in a region that is experiencing various developments, wars and revolutions. This prompted the head of one international oil giant to say, "If Saudi Arabia's oil is cut off, God forbid, we'll all die!"
Saudi Arabia's policy in OPEC has always been in the interest of stability in international markets, and the interest of member states. It has often worked to save the organization from collapse, and it is now taking action again, despite everything that is taking place around it.