No more talk shop, nobody needs it!
The energy fraternity is more than convinced the Jeddah energy summit needs to deliver. Hopes are high, with some saying that the summit may scare at least some speculators away from the markets. Yet it would be naive to underestimate the grim complexity of the issue. Prices are in no one’s control and concerted efforts are needed to move ahead and get out of the logjam. With consumers and producers getting together, the world needs to move beyond the blame game, most agree and underline.
Saudi Arabia, the global gas station, too has high hopes from the upcoming summit. “The meeting in Jeddah will discuss the increase in oil prices, which are unjustified by market fundamentals, and suggest appropriate solutions,” Minister for Petroleum and Natural Resources Ali Al-Naimi emphatically said. “This meeting is expected, God willing, to produce positive results that will contribute to stabilizing the international oil market,” he hoped. Energy market woes remained the focal point of a flurry of high-level diplomatic activity the entire week. As prices continued to play hide-and-seek with the $140 mark, and all eyes remained glued to the Kingdom, Riyadh announced convening the summit to discuss the emerging scenario - showing its concern and readiness to do ‘whatever it could’ to dampen the market sentiments.
Malcolm Wicks, the UK State minister for energy, while at the IEF Secretariat in Riyadh last Saturday — apparently on a ground preparing mission for the Sunday summit — said the British Prime Minister Gordon Brown had a discussion with King Abdullah on the oil market situation before the Kingdom made the summit announcement. And the buck did not stop there. Saudi Arabia remained on the global diplomatic radar screen. Amidst the continued frenzy in the crude markets, the UN Secretary General Ban Ki moon made it a moot point to come over to the Kingdom to discuss the emerging situation and its repercussions.
And while talking to the press after calling on the King, the secretary general made it clear that King Abdullah was deeply worried about the hovering problem and was ready to do whatever he could. The King will do all he can to bring oil prices down to “adequate levels,” he said. The King reportedly told the UN chief that oil prices were “abnormally high.”
After the meeting there were some indications that despite its expressed reservations on the issue, Saudi Arabia might also announce opening its taps further. There was though considerable debate on the extent of increase to be announced, indeed, if at all - for the OPEC still has reservations about this policy option.
Farhan Haq, a spokesman traveling with Ban, revealed that Al-Naimi told the UN Secretary General, Saudi Arabia would increase oil production by 200,000 barrels a day next month. In May, the Kingdom increased its production by 300,000. By July, production should be at 9.7 million barrels a day, Farhan Haq said.
Saudi Arabia is scheduled to start pumping oil from its new 500,000 barrel-a-day Khursaniyah oilfield within the next month, Aramco senior VP Khalid Al-Falih was recently quoted as saying in the press. However, the issue was still open to debate. “The Kingdom was yet to decide the volume of the planned increase in its oil output, an oil ministry official told the Al-Arabiya television channel.
However, even if - and this is still a big if- Saudi Arabia agrees to increase output further, OPEC may want other stake holders to play their part too - by reducing taxes on fuel in their respective countries and by ensuring to take the air out of the speculative bubble in the crude markets. OPEC is insisting on a “solution” to end record oil prices and an examination of the role of speculators during the summit, the OPEC’s secretary-general is on record having said.
While referring to the upcoming summit, the OPEC Secretary-General Abdalla El-Badri said in a recent interview in London, “this one (to be held in Jeddah) is different (from previous consumer-producer meetings). This one is specifically to tackle the high oil prices, why they are high, who is to blame.” He also asked, “Is this a real shortage in the market, or speculation, or the dollar? What is wrong?”
The issue of speculation and the high intensity of taxes on global fuel prices have regularly been pointed out as a major contributor to the current scenario. And there seems to be an interesting relationship between the value of dollar and crude market prices too. Whenever dollar gains in value, oil prices slide and whenever the case is reverse, oil markets start creeping up. And indeed producers cannot be blamed for these.
If the upcoming summit has to succeed, if it has to be different from previous such outings, all the stake-holders need to get their act together. The blame game is leading us nowhere and that needs to be avoided, if the world needs a solution to the global problem. Producers alone cannot solve this riddle; consumers have to make their bit too. That is imperative. Eyes are indeed focused on Jeddah to see some real concrete move in the right direction!