OPEC
Iran's representative to OPEC, Hossein Kazempour Ardebili, said
that his government would support an increase in OPEC oil
production if "prices go higher," Reuters reported Dec. 14. The new
Iranian stance indicates a rising degree of distrust and fear among
the members of OPEC and non-member oil producers. Iran is the fifth
major producer to suggest in the last few days that production may
have to be increased to adjust prices slightly lower and stabilize
them. The high oil prices of recent months may fall in the first
months of the coming year if producers can't keep production quotas
intact.
Oil producers have shown remarkable discipline in limiting
production and boosting prices. In March, OPEC members and non-OPEC
oil producers agreed to limit oil production and boost failing
prices. By sticking to this agreement, producers have achieved a
compliance rate of nearly 90 percent. The result has been an
unexpected surge in prices. The average world price has hovered at
about $25 per barrel, according to the U.S. Energy Information
Administration.
Oil prices are so high right now that they are not sustainable over
the long term. Producers are nervously eyeing each other, wondering
which one will be the first to break production quotas in an
attempt to capitalize - and send oil prices tumbling, as a result.
The next three months will be pivotal. In March, OPEC will meet
again to assess its stance on production and by then the most
profitable winter months will have passed.
Consumer nations are already trying to do something about high
prices. In a speech on Dec. 9, U.S. Energy Secretary Bill
Richardson said that the Clinton Administration is worried about
the rising price of oil and will take "whatever steps are necessary
to protect the American consumer and the American economy." What
the United States can do to reduce oil prices is unclear. One move
might be to allow Iraq to increase output levels and drive down
prices. [ http://www.stratfor.com/MEAF/specialreports/special26.htm ]
Prompted by Richardson's comments, officials of several major oil
producers - Indonesia, Norway, Saudi Arabia and Venezuela - said
that they would consider increasing production if prices reach
crisis levels. Venezuelan Oil Minister Ali Rodriguez said, "A rapid
surge in prices or a rapid dip in inventories would be a problem we
would correct immediately," according to Bloomberg News. So far,
only Mexico, a non-OPEC nation, has called for producers to stick
to the March output quotas. Mexican Oil Minister Luis Tellez cited
quota compliance as the major reason for oil price stability.
Cooperation between competing producers is not infinitely
sustainable. Someone will break the quotas. The question now is,
who? One possible candidate, and perhaps the one with the most to
gain, is Iraq. Although Iraq is a member of OPEC, it has not been
subject to OPEC-sponsored production quotas while under U.N.
sanctions - and it has been acting unpredictable in recent weeks.
Baghdad suspended oil exports Nov. 24 to protest continued U.N.
sanctions and temporarily boosted prices even higher. Producer and
consumer nations alike are unsure of Iraq's future actions. Able to
produce up to 3 million barrels per day with comparative ease, Iraq
by itself could cause prices to tumble.
The price of oil now seems to hinge not so much on the economic
imperatives of supply and demand, but on a political decision
pending in New York. The U.N. Security Council has repeatedly
postponed a decision on whether to suspend