DOHA, 25 April 2006 — OPEC ministers conceded yesterday there was nothing they could do to halt surging oil prices that threaten consumer nations’ economies and could trigger a collapse in demand disastrous to producer states.
The group, already pumping as much as refiners can handle, concluded at talks here that raising its 28 million barrels per day output ceiling would not rein in runaway prices.
“The market determines the oil price,” Minister of Petroleum and Mineral Resources Ali Al-Naimi, OPEC’s most influential voice, told reporters. “You know and I know that the reason the price is where it is is not from a shortage of (crude oil) supply,” he said.
Oil raced to an all-time high above $75 last week. Consuming nations - from top energy user the United States to poor African nations — are afraid high energy costs will snuff out economic growth. Producers fear a price collapse.
OPEC ministers, meeting on the final day of global energy talks here, had little enthusiasm for a Kuwait proposal to offer up all the organization’s spare capacity of two million bpd as they did in September when oil spiked above $70 a barrel. Then, as now, a lack of motor fuel in the United States, consumer of over 40 percent of the world’s gasoline, was partly to blame for the price surge. At that time hurricanes had damaged US refineries. Now the introduction of new, cleaner US gasoline may disrupt supplies in the short term. Some OPEC delegates also blame US foreign policy.
Libya’s top oil official said fears of a US strike on Iran, the world’s fourth biggest crude exporter, had added $15 to the cost of a barrel of oil. Kuwait’s oil minister reckoned another $7 had been added by consumers’ sense of vulnerability.
Saudi Arabia also spoke of international tension. “There is nothing that can be done about the tension that has been created and until that tension abates the price will continue to be high,” Al-Naimi said.
Investors agreed OPEC, supplier of a third of the world’s oil, could do nothing to steer oil from its highest level in real terms since 1980. “OPEC can’t do anything about the upside to the market. They don’t have much scope left for managing,” said Michael Coleman, managing director of hedge fund Aisling Analytics.
Energy consumers and producers here for the International Energy Forum agreed there was an urgent need to bring down prices. But they were split over how to do it.
Consumers want greater access to oil and gas in the Middle East, Russia and Africa. Producers want to be sure investing in new fields will pay off. Both sides criticize major oil firms for failing to build new refineries.
OPEC members point out they have raised oil output by over 10 percent since 1999. Saudi Arabia alone will spend $50 billion over the next five years on new fields and refineries.
In contrast, the United States, which uses a quarter of the world’s oil, has not built a refinery on its soil for decades. OPEC ministers agreed yesterday to leave the oil output ceiling unchanged and to keep production at its previously agreed levels until the forthcoming extraordinary meeting due to convene in the Venezuelan capital Caracas on June 1.