The 12 nations that make up O.P.E.C. have always been considered a cartel that tries to control oil prices and therefore not a body the Group of Seven industrialized countries wanted to dialogue with.
That official strategy worked when oil prices were about a third of what they are today, but there has been a major rethink as a result of the doubling in crude prices over the past year.
On June 22 in the Saudi Arabian port city of
This initiative is being led by the world’s largest oil producer,
While some of that is just good politics to foster dialogue, there are a number of things on both sides that could help deflate prices in the near term:
The reality is most senior people in the industry miscalculated demand and therefore pricing in the past five years. I don’t recall a time since the late 1980s where you have a slowdown in the major economies of the world and demand continues to rise. That is the case now.
The International Energy Agency (I.E.A.) in I dug up a 2005 article from Daniel Yergin a well known consultant and author on oil. His calculations, when oil was at $60, were that there would be an “unprecedented build up of oil supply in the next few years.” His team pointed to
I dug up a 2005 article from Daniel Yergin a well known consultant and author on oil. His calculations, when oil was at $60, were that there would be an “unprecedented build up of oil supply in the next few years.” His team pointed to
Which takes me back again to managing expectations in Jeddah. During the oil crisis in the autumn of 1973 when O.P.E.C. turned off the oil spigot, dialogue was at a minimum and confrontation ruled the day. There was not a shortage of oil production, but a lot of political confrontation. Three and half decades later with prices still looking for a top, the dynamics are different. Oil is in short supply, but discussions and meetings are not.
Let’s hope this summit in Jeddah presents some concrete ideas for change and ministers don’t leave the Kingdom empty handed.
ABOUT THIS BLOGJohn Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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