Striking a balance
Will delegates meeting in Jeddah this week manage to stabilise oil prices? Sherine Nasr
seeks an answer
The eye of the world will be watching carefully oil prices after the Jeddah Energy Meeting on Sunday, although experts believe that the market will make its own decision in the short-term value of this diminishing energy source. More transparency rather than more oil output is what the market needs to stabilise prices; producers, consumers, oil executives and firm representatives convening in Jeddah could not agree more.
Oil prices jumping to record highs, just under 140 per barrel (pb) on 16 June, were obviously not reflecting supply-demand fundamentals. "More oil supply is unlikely to rein in skyrocketing oil prices," according to Saudi Arabia's Minister of Petroleum and Mineral Resources Ali Al-Naimi.
The latest increase in oil prices was not the first in recent times. A double- digit increase estimated at $16 a barrel was recorded on 5 and 6 June, during which crude oil increased from an average of $123 pb to hit the $139 mark as tension between Iran and Israel mounted.
In a desperate move to control spiralling oil prices, Saudi Arabia decided last week to increase output by a further 200,000 barrels per day (bpd) starting next month. This comes after boosting oil production by 300,000 bpd to pump 9.45 million bpd this month.
In the meantime, the Organisation of Petroleum Exporting Countries (OPEC) announced that there is no need to increase oil output at present. OPEC Chief Chakib Khalil, who is also Algeria's minister of energy and mining, noted that there is a need to assess the situation carefully before any action is taken.
Commenting on the current oil market situation, Egyptian Minister of Petroleum and Mineral Resources Sameh Fahmi stressed the fact that having access to hydrocarbon supplies has become only available to oil producing and major consuming countries with high economic capabilities. "Developing and poor countries will have difficulty in accessing current or future energy supplies, and will eventually be denied the opportunities for development and progress," warned Fahmi.
He further suggested the establishment of a fund responsible for facilitating access to energy resources to countries with limited economic capabilities.
At the same time, Fahmi underlined the fact that the gas market has directly been affected with current unprecedented oil price levels. The gas industry is in a state of anticipation to re-evaluate the situation and amend gas contracts signed years ago, he said. "Long-term gas contracts signed during the past decade and the first half of this decade have become out of date," commented Fahmi, "as they do not reflect the drastic increase in oil prices or the costs of producing gas."
The official lamented that high oil prices have taken their toll on the gas industry. "The situation resulted in hindering the signing of new gas export contracts," he revealed. "Several gas field developments have been postponed although these fields are committed to sales contracts for the local or export market."