Pressure on OPEC is growing. From political to psychological, virtually all forms are being applied.
At an energy security conference in Washington last week, while Saudi Oil Minister Ali Al-Naimi expressed the opinion that high gasoline prices in the US would have to be blamed on “balkanized gasoline markets and tight refining capacity in the US,” deputy US Energy Secretary Kyle McSlarrow insisted that the driver (of the higher gasoline prices) is the high crude prices.
In the meantime, Federal Reserve Chairman Alan Greenspan added to the debate by saying that oil and natural gas price futures suggest energy prices will remain persistently high and have begun affecting businesses’ investment decisions.
“These elevated long-term prices, if sustained, could alter the magnitude of and manner in which the United States consumes energy,” Greenspan warned at the Washington conference.
The International Energy Agency, in the meantime, has also been warning that prices at current levels through the end of this year would cut economic growth by about half a percentage point. On the other hand the London-based Center for Global Energy Studies in its monthly oil report issued last week said, “Recent events and increased expenditure on security must have raised the price that Gulf producers need and it looks as if the Organization’s real price target is now above $30 a barrel.”
As the pressure on OPEC to lower the prices of crude seems to be growing, OPEC also appears to be playing its cards deftly in this battle of wits - as some have come to say of it. In a statement, OPEC President Purnomo Yusgiantoro announced last week, only a day after the Washington meeting, that the group which pumps almost a third of world’s crude oil, may raise its price target by 30 percent because of the steep decline in the value of dollar that has reduced the purchasing power of the oil producing states. The Organization of the Petroleum Exporting Countries is studying whether to increase its four-year-old price band of $22 to $28 a barrel, Purnomo Yusgiantoro said. He added that some group members have asked for a new price band to take into account dollar depreciation and world inflation. According to this new thinking oil at $32-34 a barrel could be considered safe and appropriate he said.
Venezuela has openly asked for a revision of the OPEC price band, set at its current levels in mid-2000. Iranian Oil Minister Bijan Namdar Zanganeh insisted that an oil price hovering around $28 a barrel would be a “good price” for OPEC.
Qatari Oil Minister Hamed Al-Attiyah who served as OPEC president in 2003 while addressing an industry conference in Paris last week said he was not yet aware of any formal proposal to increase the targets at OPEC’s June 3 ministerial meeting in Beirut, but added that the oil ministers were likely to discuss the idea. “We will have a chance to see what is going on and see how this suggestion would be implemented,” the minister added.
On the other hand Saudi Arabia seems committed to the current OPEC price band. Naimi emphasized during the Washington conference that the Kingdom believes that the price of $25 for the OPEC basket is a fair one for both the consumers and producers.
Saudi Arabia has also assured the world community at the highest levels that it believes in equitable and justified returns to both the producers of energy and its consumers. Prince Bandar Ibn Sultan, the Saudi envoy to Washington, has assured President George W. Bush that the Kingdom would ensure stability of crude oil prices.