By Humberto MلrquezBY bringing together the world’s major oil producers and consumers in Jeddah, Saudi Arabia marked a turning point in the negotiations for a new global energy order that is emerging under the weight of soaring oil prices, which are driven by factors other than supply and demand.
“It could be asked whether the 140 dollars per barrel price can be negotiated between Opec (Organisation of Petroleum Exporting Countries), the new actor, which is global capital, and the governments of the Group of Eight (industrial powers),” Victor Poleo, a Venezuelan professor of graduate studies in the oil economy, commented to IPS.
On Thursday, crude oil prices broke through the 140-dollar a barrel barrier for the first time. The price of oil “can no longer be dictated by Opec, because a significant portion of the price would seem to obey market laws that are not its own,” said Poleo.
Saudi Arabia perceives “the beginning of a transition stage to a new power order in the world energy system,” he added. In Poleo’s view, “the global energy system is witnessing the emergence of a new order. In the old one, under Opec, the level of prices hovered around 70 dollars a barrel; in the new system, the increase is of the same magnitude,” and the decisions taken by Saudi Arabia “form part of the new talks.”
The informal June 22 meeting of representatives of governments and the major oil companies in the Saudi Arabian city of Jeddah called for more investment in crude production, as well as greater transparency in oil markets, where futures trading is helping to drive prices up. Producer and consumer nations and companies will meet again in Madrid next week, at the 19th World Petroleum Congress, and in late 2008 in London.
Spain’s Minister of Trade and Industry Miguel Sebastiلn said that “after enjoying 15 years of low prices, our economies have become addicted to oil, and the world is not prepared for the challenge of a steady rise in prices.” Opec is made up of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela, which account for over 75 per cent of global proven oil reserves.
Referring to the Jeddah meet, the Caracas newspaper El Nacional pointed out that the “father of Opec”, Venezuelan lawyer Juan Pablo Pérez Alfonzo, proposed half a century ago the creation of an organisation of producers and consumers that would regulate the world oil market.
The corporations that controlled the oil business, known back then as the “seven sisters”, scorned the proposal, and Saudi Arabia, Iran, Iraq, Kuwait and Venezuela went on to found Opec in 1960 in Baghdad.
At the time, Venezuela was the world’s leading oil exporter, a position that was taken over and has been held for decades by Saudi Arabia, which sent from Jeddah a message to its fellow Opec members that it will not favour a rise in prices, as indicated by its unilateral decision to boost output from 9.5 to 9.7 million barrels a day as of July.
Meanwhile, Shokri Ghanem, the head of Libya’s National Oil Corporation, said his country was studying the possibility of cutting output to protest a bill under debate in the US Congress that would empower the Justice Department to sue Opec members for limiting oil supplies.
Libya is also fighting a US law that allows the families of victims of state-sponsored terrorism to go to court and seek the seizure, as punitive damages and compensation, of any asset owned by the terrorist-sponsoring country, or of money from those governments that is held by US companies doing business with them. These remarks pushed prices up to a record high above 142 dollars a barrel by Friday.
Opec Secretary General Abdalla Salem el-Badri said the organisation planned to invest 160 billion dollars over the next five years to raise production by five million barrels a day. The members presently pump 32 million barrels a day, while global demand amounts to 86 million barrels.
US economist Joseph Stiglitz, winner of the 2001 Nobel Prize for economics, wrote earlier this month that “Only new patterns of consumption and production — a new economic model — can address that most fundamental resource problem. “Two factors set off today’s crisis: the Iraq war contributed to the run up in oil prices, while biofuels have meant that food and energy markets are increasingly integrated,” he added.
The big oil companies, in the meantime, are raking in tens of billions of dollars each. With these profits, said Poleo, global capital is financing its positioning with regard to the shifts occurring in the global energy scenario. The price bubble continues to swell, to the benefit of these interests, although analysts say oil prices will inevitably come down.
—IPS News, Dawn