Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Mar. 2 -- In the immediate wake of events in Libya, reports began to emerge that looked like doomsday was upon us. Indeed, certain sections of the mainstream media gave the impression that prices would be going through the roof as one oil-producing country after another fell.
Fortunately, saner heads are now prevailing.
“While emotions are running high, journalists and analysts are misreading the situation,” says Fereidun Fesharaki, chairman and chief executive officer of FACTS Global Energy, noting that the market is now hit on a daily basis with questions “from a total collapse of the key oil producing countries to $200/bbl oil.”
For starters, Fesharaki reminds us of the difference between North Africa—where the turbulence has been focused—and the Middle East—which has been relatively quiet. He then goes on to make some bold statements about the unrest and why it will not spread.
“There is zero chance of a threat to key oil producers—Saudi Arabia, Kuwait (which has a challenging parliament), the UAE, and Qatar,” Fesharki says, noting that in these countries, “virtually every local is well off and many are millionaires.”
He says the situation is altogether different from Egypt, Tunisia, Algeria, and Libya, “where huge unemployment and low standards of living have electrified the population against the government.”
To underscore his point, Fesharaki says, “Millionaires do not go to the street and face bullets; the poor, unemployed, educated youths do.”
Without a doubt, Fesharaki does concede that there are grievances in the Middle Eastern countries and that more people will demand rights to express themselves. But he insists that the dimensions of opposition are “vastly different” from what we see in Africa.
“The price [of oil] has risen mostly due to misreading of events in the Middle East and Africa,” says Fesharaki. “Let us not forget the facts and mix up our geography,” he concludes.
Similarly, Bhushan Bahree, senior director of global oil for IHS CERA, is clear in his understanding of the situation now facing us as a result of events taking place in North Africa.
Bahree notes that loss of significant volumes of oil supply from Libya has caused anxiety but “not alarm and dread.”
He says the current situation contrasts with the response to oil supply disruptions in the 1970s, when consumers “became fearful of actual shortages and panicked.”
In his view, the situation is relatively calm due to the development of institutions and international cooperative efforts, led by “clear operational understandings” between members of the International Energy Agency and the Organization of Petroleum Exporting Countries.
Bahree concedes that the world is not completely protected against every oil supply threat, noting that “a disruption in excess of the ability of the mechanisms in place to cope with a physical disruption could still occur.”
But he also insists that the defense mechanisms now in place worked during Venezuelan strikes in 2002 and 2003, the Iraq war in 2003, and Nigerian supply woes related to political troubles.
“Now,” he says, “Saudi Arabia has stepped in smoothly to offset supply losses resulting from the violence and political upheaval in Libya. Others in OPEC, notably in the gulf, may also help. The IEA is standing by to assist, if needed, with more oil.”
In a word, Bahree concludes that, “This is not 1979.”
Bahree and Fesharaki are analysts worth emulating.
They are providing much needed balance in the world of unstable opinion now swirling around events taking place in North Africa and the Middle East.
Their views are a welcome alternative to an otherwise downward spiral of ignorance, doubt and fear.
Contact Eric Watkins at [email protected].
File photo from PDVSA..
