Another break for Uncle Sam
Once again OPEC is rescuing the flailing economy of the world's biggest oil importer, writes Gamal Nkrumah
At an emergency meeting in Vienna last week, the Organisation of Petroleum Exporting Countries (OPEC) decided to increase production of crude oil by 1.5 million barrels per day. The move, which will increase OPEC production to 24.5 million barrels per day, comes at a time when the international community is bracing itself for a possible strike against Iraq. It is also widely seen as a singular triumph for Saudi Arabia, the world's largest oil exporter. This situation is ominously reminiscent of the last Iraqi crisis in 1990-91.
The move also comes at a time when oil production in a major OPEC member state, Venezuela, has come to an abrupt halt. Venezuela, which insisted on being included in the new OPEC quota, has seen its oil production grind to a halt amid industrial strikes and political disturbances. OPEC's Secretary-General Alvaro Silva Calderon of Venezuela strongly defended his country's position.
Oil prices have been rather volatile over the past two years, largely because of political uncertainty over Iraq. Relatively high international oil prices have also led non-OPEC exporting countries to step up their production to make a quick profit. Additionally, non-OPEC exporters have been quick to exploit Venezuela's production problems for their own benefit.
In the past, the row between Russia and OPEC over oil production quotas has been a major source of tension and a reason for oil market instability and price volatility. However, in Vienna a request was made for major non- OPEC oil exporters, such as Norway, Russia and Mexico, to increase production levels.
The United States has traditionally relied on Saudi Arabia's goodwill and its unique capacity to put extra crude on the world market at short notice. This floods the market with oil, which in turn pushes down prices.
In light of the bad publicity Saudi Arabia has been attracting since the 11 September attacks, Saudi authorities have been keen to improve the kingdom's image and credibility in the West. "We hope the agreement will produce a reasonable price for consumers and send a very strong message to the market to prevent panic," said Abdullah Al-Attiyah, OPEC's president.
The US, the world's largest consumer and importer of crude oil, will undoubtedly be happy with OPEC's decision given that it is the most highly motorised society on earth, with 800 vehicles per 1,000 inhabitants.
Although a major supplier of oil to the US, Venezuela's present economic paralysis is largely due to a US administration keen to destabilise the government of President Hugo Chavez.
The US is now marginally more dependent on Gulf oil than it was three decades ago -- it imported 14.1 per cent of its crude oil supplies from the Gulf in 2001 as opposed to 13.3 per cent in 1977. Given this, the US is still keen on increasing the production of non- OPEC oil exporters in West Africa and Central Asia.
President George W Bush, an oilman himself, knows all too well that the US needs an obliging OPEC to sustain its own high- cost, Texas-centred oil industry. With such compliant friends within OPEC, the US will never have to rethink its energy policy.
Al-Ahram Weekly Online : 23 - 29 January 2003 (Issue No. 622)
Located at: http://weekly.ahram.org.eg/2003/622/ec7.htm