OPEC's failure to increase production Wednesday brought immediate bad news for oil consumers, in the form of higher prices. However, big oil importers should take heart from what may be an important silver lining to this cloud.
OPEC's failure to increase production Wednesday brought immediate bad
news for oil consumers, in the form of higher prices. However, big oil
importers should take heart from what may be an important silver lining to this
cloud.
If the breakaway group of
Saudi
Arabia
,
Kuwait
,
Qatar
and
the
United Arab Emirates
solidifies into a new oil producers' group that adjusts its output according to
shifts in supply and demand--a sort of OPEC-lite--consumers should be pleased.
Those four countries have time and again proved themselves to be the most
moderate and pragmatic of OPEC members--who have sought in the past to prevent
oil prices rising so high that they damage the economies of major importers.
And they are the only ones who actually have the capacity to increase
production at short notice. Out of OPEC's 4.5 million barrels a day,
Saudi
Arabia
alone holds 3.5 million
barrels a day.
That is in contrast to members like
Iran
and
Venezuela
, who
have more often supported higher prices and used OPEC as a platform for
anti-Western rhetoric.
For example, Venezuelan Oil Minister Rafael Ramirez took a break Wednesday from
talking about the need to maintain the oil price above $100 a barrel in order
to criticize NATO for bombing Gadhafi's forces in
Libya
.
And these countries are already producing as much oil as they can.
"What happened in this meeting was kind of a joke. We had countries such
as
Venezuela
,
Algeria
and
Iraq
saying they don't want to increase output when they can't anyway," said
Christophe Barret, global oil analyst at investment bank BNP Paribas.
"OPEC was and is
Saudi Arabia
. It's
a bad thing for the other countries that
Saudi
Arabia
has had to show it," Mr.
Barret said.
Just as the torrential downpour that swept through
Vienna
during the meeting was eventually broken by bright sunshine, the silver lining
to the OPEC debacle soon became clear.
Two OPEC delegates from the Gulf region said Saudi Arabia alone will pump an
extra million barrels a day this month, and other Gulf states would also
increase output to meet higher demand.
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