September 14, 2007
$80: Opec is not happy
Oil prices at $80 a barrel should be a source of happiness to crude oil producing countries. But the Organisation of the Petroleum Exporting Countries is not happy.
Abdalla el-Badri, Opec secretary general, said in its first response to the current record prices that oil prices were high and would not last, because they are not supported by oil market fundamentals.
“Prices are high. We are not favour of high oil prices,” Mr el-Badri told a small group of journalists, including myself. “I don’t think it’s permanent.”
“The fundamentals do not support the price at this time,” Mr El-Badri said after Opec this week agreed to increase its production by 500,000 barrels a day.
For Opec, the price reaction to its supply hike has been a blow. The oil cartel presented the decision as its contribution to prop up the world economy hit by the current credit squeeze.
“We care about you,” was Opec’s message on the day of the announcement.
But instead of prices cooling down, as the cartel hoped, crude oil cost surged hours later to a new all-time high of $80.20 a barrel. And oil analysts and the International Energy Agency, the industrialised countries’ energy watchdog, instead of welcoming the production hike, said that it was “too little, too late.”
The price surge has been a bad coincidence, Mr el-Badri explained, saying that Opec’s decision came as a tropical storm hit several US refineries and just a day after rebels blow up several natural gas pipelines in Mexico.
Mr el-Badri has a point here, but that is not going to change the public perception of Opec in consumer countries.
