JEDDAH, 22 May 2004 — Members of the Organization of Petroleum Exporting Countries are now attempting to cool down the skyrocketing world oil prices, which recently surpassed the $41 barrier. Ironically, only a few weeks ago, the same members reported that world demand and supply of oil was balanced and there was no need to increase production to restrain the rising prices. They claimed the increases were due to temporary factors.
In the next OPEC meeting on June 3, Saudi Arabia wants to see an increase in the oil quota. The question now is why the organization in February made its shocking decision to decrease its oil quota by a million barrels a day while oil prices were increasing.
Are OPEC’s oil experts unaware of the supply and demand factors? OPEC seems to increase oil production when world oil markets need it lower and decrease output when there is a dire need for it. On Jan. 12, 2003, during its meeting in Vienna, OPEC decided to increase its oil quota by 1.5 million barrels per day from 23 million to 24.5 million, claiming that oil prices were high and they had to put a lid on it. Less than two months later, the members reversed their decision and reduced their oil quota by two million barrels per day, effective from June 2003. They met again and decided to increase their quota by 1.5 million barrels as of Nov. 1, 2003, but reduced it again by a million during their meeting in Algeria in February 2004.
(Dr. Mohamed M. Shams is president of Economic and Managerial Feasibility Consulting Center, Jeddah.)