Watching the World
Even before the 11 Organization of Petroleum Exporting Countries heads of delegation began to emerge, one by one, from their closed-door meeting on production increases in Vienna on Sept. 10, the world's brokers and analysts had already beaten them to the punch.
Even before the 11 Organization of Petroleum Exporting Countries heads of delegation began to emerge, one by one, from their closed-door meeting on production increases in Vienna on Sept. 10, the world's brokers and analysts had already beaten them to the punch. An output hike of around 750,000 b/d had been speculated; OPEC offered 800,000. This, of course, has been the story for most of the last year for the organization: OPEC repeatedly moving to release the steam from evermore overheated oil prices without cutting too deeply into its takings-only to find the market has made adjustments in advance, nullifying the downward pressure bolstered supply might bring about.
The day after OPEC agreed to the increase, Brent crude oil futures were skittish in London but still closed at $33.62—up $0.84 on the previous day's trading.
Given that some analysts' calculations, factoring in "leakage" and overproduction, put the number of "real barrels" pumped on to the market by OPEC as low as 50,000 b/d, that the effect of the organization's "boost" to output was short-lived and negligible is hardly a shock.
Recriminations, as ever, underpin this impasse, although a stable oil price remains the stated aim common to OPEC states and oil-consuming countries. The European Union Energy Commissioner Loyola de Palacio recently expressed concern that anything other than a "substantial" production increase from OPEC could jeopardize economic growth on the continent. OPEC Pres. Al
As Robert Priddle, Executive Director of the Paris-based International Energy Agency, pointed out in a follow-up to his organization's monthly oil market report, for all the hope—commercial and political—pinned on OPEC's latest output hike stabilizing oil prices, "just the reverse" has been achieved.
For Priddle, the ineffectuality of OPEC's move only poses further questions about production adjustments to be made at the organization's summit later this month in Caracas, and the price review due now in November. "Expectations of government intervention," as he stresses, "unsettle markets, they do not stabilize them."
Everyone a loser
Somehow the high profile protests by Europe's hauliers, farmers, taxi drivers, et al., that led to the front pages of daily newspapers last week all carrying a variation on the "Fuel crisis grips Europe" headline have obscured the real losers in this pitched price battle. World stocks of crude may be dwindling, but no government—emergency action plans are in place—would let its domestic economy grind to a standstill when there is fuel behind blockaded refinery gates.
The graver concern is, of course, that the global economy will be thrown back into a tailspin by chronically high oil prices and shortage of supply starting to bite in those developing nations that rely most heavily on imports and, by IEA estimates, now use some 40% of world oil, compared with 26% at the time of the last oil crisis in the 1970s.
With a worldwide economic bust looming on the horizon, the price at the pump and the high cost of heating a home this winter are likely our least-pressing concerns.