Indonesia's Energy Minister, Purnomo Yusgiantoro, is unhappy with the modest production cut, from June 1, of 2 million barrels per day, adopted by the Organization of Petroleum Exporting Countries last week. He intends to demand further reductions at the June 11 get-together in Qatar.
The deal struck is so convoluted and loopholed that actual output declines may amount to no more than 600,000 bpd, assuming, miraculously, full compliance. Quotas were first raised before the war to 27.4 million bpd - a theoretical level, not met by actual supply. Crude prices, entering a period of seasonal weakening, dropped further on the news.
With Nigerian and Venezuelan crude recovering from months of strife, this downtrend may be temporary. Global excess capacity is a mere 1 million bpd - one fifth its prewar level. As North American and North Sea production declines, the importance of Gulf producers soars.
OPEC's eleven countries - Algeria, Indonesia, Iran, Iraq (suspended in 1990, following its invasion of Kuwait), Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela - control one third to two fifths of global oil output and three quarters of the far more important residual demand - traded between net consumers and net exporters. Residual demand is set to double by 2010.
Still, OPEC - led by Saudi Arabia, now off the US buddy list - faces fundamental problems that no tweaking can resolve. Iraq, in the throes of reconstruction and under America's thumb, may opt to exit the club it has founded in 1960 and, thus unfettered, flood the market with its 2.3 to 2.8 million bpd of oil. Iraqi production can reach 7-8 million bpd in six years, completely upsetting the carefully balanced market sharing agreements among OPEC members.
This nightmare may be years away, what with Iraq's dilapidated and much-looted infrastructure and vehement international wrangling over past and future contracts. All the same, it looms menacing over the organization's future.
Far more ominous perils lurk in Russia, the second largest oil producer and growing. Though the cheapest and most abundant reserves are still to be found in the Persian Gulf, Central Asia and Russia are catching up fast. Ali al-Naimi, the Saudi oil minister may be forced out of office by this apparent crumbling of the organization's stature.
This would be unwise. Naimi is widely credited with engineering the tripling of oil prices to more than $30 a barrel between 1998 and 1999. As the informal boss of the state-owned Saudi oil behemoth, Aramco, he has already introduced postwar output cuts. The oil market is so volatile that even marginal production shifts affect prices disproportionately. Naimi is a master of such manipulation.
Saudi Arabia regards itself as the market regulator. It keeps expensive, fully-developed, wells idle as a 1.9 million bpd buffer against supply disruptions. It is this "self-sacrificial" policy that endows it with tremendous clout in the energy markets. Only the United States can afford to emulate it - and even then, the Saudi Kingdom still possesses the largest known reserves and sports the lowest extraction costs worldwide.
OPEC is, therefore, not without muscle. Saudi Arabia had punished uppity producers, such as Nigeria, by flooding the markets and pulverizing prices. Yet, the organization is riven by internecine squabbles about market shares and production ceilings. Giants and dwarves cohabit uneasily and collude to choreograph prices in what has long been a buyers' market. These inherent contradictions are detrimental. If OPEC fails to recruit another massive producer (namely: Russia) soon - it is doomed.
Paradoxically, the Iraq war is exactly what the doctor ordered. OPEC's only long-term hope lies in a geopolitical shift, the harbingers of which are already visible. Russia may join the cartel, disenchanted by an imperious and haughty USA - or the Europeans may "adopt" OPEC as a counterweight to the sole "hyperpower" newfound energy preeminence.
America announced its intention to pull out its troops stationed in Saudi Arabia. As this major producer is thrust into the role of the "bad guy" - it acquires incentives to team up with other "pariahs" such as France and, potentially, Russia. Controlling the oil taps is a sure way to render the USA less unilateral and more accommodating.
US interest are diametrically opposed to those of oil producers, whether in OPEC's ranks or without. The United States seeks to secure an uninterrupted supply of cheap oil. Yet, a consistently low price level would go a long way towards reducing Russia back to erstwhile penury. It would also destabilize authoritarian and venal regimes throughout the Middle East.
This unsettling realization is dawning now on minds from Paris to Riyadh and from St. Petersburg to Tehran. As the United States looms large over both producers and consumers, the ironic outcome of the Iraqi war may well be an oil crunch rather than an oil glut.
About The Author
Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, PopMatters, and eBookWeb , a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory Bellaonline, and Suite101 .
Until recently, he served as the Economic Advisor to the Government of Macedonia.
Visit Sam's Web site at http://samvak.tripod.com; http://samvak.tripod.com
Lincoln Stretch rentals Alsip ..Roberto Calvo Macias, a young author and thinker from Spain,... Read More
Currently when we transport troops we use large cargo planes... Read More
The number of countries in the world at the moment... Read More
Many environmentalists are against roads through the forest because it... Read More
While many Pennsylvanians are struggling to figure out how they... Read More
Throughout all recorded history on our lovely little planet, Earth's... Read More
Let's put it all into perspective: the U.S. has an... Read More
The FTC franchising division purports their law enforcement experience in... Read More
Britain has a proud tradition of valiant armed forces and... Read More
OH MAN!Here we go again. I guess now the "proof... Read More
In what the Americans love to describe as the war... Read More
Recently in Professional Builder a cover article discussed how the... Read More
The prosecutors in the Martha Stewart Case used testimony from... Read More
With pain rocking through my whole body today, I cast... Read More
Our trade deficit is directly proportional to our attacks on... Read More
The resignation from cabinet yesterday, Sunday, by the Israeli minister... Read More
As the death toll in the avalanche-hit Jammu and Kashmir... Read More
Revitalization Downtown projects are all the rage in fact the... Read More
This is a thought on the study of Home and... Read More
Everyone knows the United States Government often falls down in... Read More
"Those who sacrifice essential liberty for temporary safety are not... Read More
We have known of the innate characteristic need of members... Read More
It appears we are having a terrible situation with the... Read More
Thought of the day; Questions about the judicial system. If... Read More
I always have to remember to take a deep breath... Read More
Western Springs shuttle limo ..Land Mines have been one of the most evil left... Read More
We have all heard of the huge debates surrounding genetically... Read More
The notion that local governments should have almost total monopoly... Read More
The Randolphs:Peyton Randolph was the first President of the United... Read More
Many very nice and loving homosexual male couples want to... Read More
Recently the Los Angeles Transit workers are on Strike and... Read More
We have brain drain issues in Silicon Valley, we have... Read More
A visitor to Moscow would be immediately struck by the... Read More
When organising a country or a group of people in... Read More
Today we have a new franchise report from the Federal... Read More
I would like to discuss the blocked persons list of... Read More
We need more oversight and transparency in government. We need... Read More
The Federal Trade Commission in their latest move to increase... Read More
Corporate America has been shaken recently by lawsuits and criminal... Read More
Many had made mention of the problems of business opportunities... Read More
Ted Stevens (R-Alaska), chairman of the Senate Commerce Committee, has... Read More
Ohio's transportation sector seems to be strong, even with Ohio's... Read More
Submiting the Criminals to The ICC!Everybody concerns about justice in... Read More
We are currently seeing a build up in China of... Read More
With the recent shakeups in the presidential cabinet, it has... Read More
In an effort to assist our political leadership it would... Read More
Is the only way to fight Fundamentalist Extremists becoming one... Read More
As global warming continues to escalate the concerns of today's... Read More
Well the title is absolute Bull Crap, but this article... Read More
How do you feel about Terminator Seeds from Monsanto? I... Read More
Political |