DEAD SEA COAST, Jordan, 17 May 2004 — Qatar’s Energy Minister Abdullah ibn Hamad Al-Attiyah on Saturday attributed latest hikes in oil prices mainly to psychological factors created by turmoil in Iraq and the attacks in the Saudi port of Yanbu.
“I believe that Middle East instability has added at least $8 to the price of oil,” which has risen above $41.50 per barrel in New York in recent days, Al-Attiyah told a discussion at the World Economic Forum (WEF) conference.
He said recent price rises “have not been accompanied by shortages,” suggesting the crisis is largely being driven by market sentiment, not an imbalance between supply and demand.
“It is always easy to turn OPEC into the scapegoat, but we are trying our best to stabilize the market,” he said.
He cautioned that OPEC’s ability to influence prices was more limited than it was during the oil shocks of the 1970s and early 1980s
“This is because the organization now accounts for only 35 percent of global output and because most OPEC members have only limited ability to boost production,” which is already running more than two million bpd above the official ceiling of 23.5 million bpd, he said.
However, Al-Attiyah raised the possibility of taking up a Saudi proposal for increasing crude production of OPEC member states by 1.5 million bpd during the Amsterdam meeting of the International Energy Forum later this month.
He said representatives of OPEC countries will discuss “market developments, but these informal talks may convert into an emergency session in order to consider the Saudi proposal,” he said. “However, a formal decision on that proposal may not be made until OPEC’s meeting scheduled for June in Baghdad,” he added. Egyptian Petroleum Minister Sameh Fahmy suggested the rise in oil prices “has also been exaggerated by the depreciation of the US dollar versus the euro and other major currencies.” He added “In euro terms, oil prices have actually declined since 2000. (But) the dollar’s gains seen in the past few months have only restored part of those losses.”
Another participant, Alan Larson, US undersecretary of state for economic, business and agricultural affairs, noted that the economic impact of oil prices had dropped in recent years “as energy costs have come to account for a progressively smaller share of US and global output”.
“Nevertheless, recent reports showing an acceleration in inflation in the United States can be traced in part to rising oil prices. Further increases could have a more serious impact,” Larson said.