|
Author: Sam Vaknin Article source: http://kabish.com/. Used with author's permission.
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; palma@unet.com.mk
Weight Loss Recipe: Avocado, Walnut & Crispy Bacon Salad
Losing weight doesn't have to be boring when you focus on bright, colourful meals. What does this mean? Simply by making sure your plate reflects a range of col...
Choosing a Credit Card
Choosing a Credit Card
Give Your Dreams Substance
Setting goals is wonderful; it confirms that we've taken those first awkward steps towards attaining what we desire in our lives. The simple fact that you've ta...
Free Debt Management Services Compared
Here are some ways that you can compare different debt management services, to make sure you use the best one.
Is Adware - Spyware Putting Your Privacy at Risk
Do you sometimes notice your computer running slower. Is your computer acting strange almost like its possessed? Well, it just may be plagued with Spyware. Sp...
Mothers Day Tribute
We hear so much about the term parenting these days that it is easy to forget that mothering and fathering are distinctly different activities. Parenting is the...
Search Engines: Tips and Strategies on Getting Listed and Ranking High for Newbies
You've got a website. You've put countless hours into it, tweaking the look and feel and making sure all the links work. The bad news is there are a gazillion o...
No Money Down Loans
You want to buy a home but you do not have money for a down payment or for closing costs? Well, just forget it. At least that is what you have probably been t...
Policy Separated from Politics
Here is Noam Chomsky making a most important connection. Politics has become something totally absurd. We see Mr. Chomsky makes a good case for something quite ...
Italics Part 1 - Do You Need to Use Italics?
Before you hit "CRTL+I" in your word processor and add yet more italics to your scene... stop and think. Do you really need them? What effect does the over-use ...
Fast Weight Loss - 7 Day Diet Program for Quick Weight Loss
If you are in hurry to lose a few pounds. There are a few diets out there now, that are designed to help you lose some extra weight quickly.
Is It Time to Send Your Out-of-Control Small Business to Brat Camp?
Small Business Consultant Gives Tips to Help You Grab the Reigns and Take Control Again. Remember when your business was an infant? It was cute and cuddly and l...
Babywearing - How To Choose The Just Right Carrier For You, and Your Baby
Having trouble desiding what baby carrier is going to work best for you and your family? Find out about all the diffrent options, the advantages and the drawbac...
How We Eluded The Bear Of 2000
The date October 13, 2000 will forever be embedded in my mind. It was the day after our mutual fund trend tracking indicator had broken its long-term trend line...
You Can!
"There are only two ways of bringing brightness into your world; either change your attitude or open the closed doors of your brain"
Real Estate Investors - Red Alert
Real estate prices - bubble, cycle or nothing to worry about?
How to Run a Successful Link Exchange Program
Link Exchanges are a very time consuming project. The time it takes to find the sites to exchange with, contact them and place a link on your page can seem lik...
Train Your Dog With Respect
Proper training of your dog should begin when he is a puppy. The first four months of a dog's life are very important in the training of your dog. This is whe...
7 Questions to Ask Before You Advertise
If you're going to advertise, you need to be smart about it -- or you can quickly find yourself with a blown budget and not much to show for it. Below are seven...
Homemade Whipped Cream
Most grocery stores carry cans of whipping cream ready to spray onto your favorite desert. Some of these cans even come in chocolate flavor. But, instead of c...
Watering Your Young Child’s Mind
An overview of fun, simple activities that stimulate early childhood development and the serious expert research supporting them.
Treadmill Choosing Tips
What treadmill model should I choose? - this is the questions more and more people who want to exercise at home are asking themselves. Well it really depends on...
The Language and Meaning of Flowers
Flowers and bouquets of flowers have a meaning of their own. Most of us know that a dozen red roses means, "Be mine." But did you know, for example, that a pr...
How Much Is Your Popcorn Worth? Powerful Lessons In Marketing & The Psychology Of Selling - Part 2
Part 2 - Could buying popcorn in a theatre be a 'conditioned' response? Could it be that people are 'trained' to believe that movies and popcorn go 'hand in han...
|
Print this page