OPEC head throws ball back into speculators' court
General Secretary of the OPEC says the rise in crude prices is because of speculation, devaluation of the dollar and not a problem with the supply.3 July 2008
MADRID - Contrary to the claims of a number of oil giants, such as Repsol YPF and BP, who insist lack of supply is behind spiralling global crude prices, OPEC General Secretary Abdalla Salem El-Badri on Tuesday blamed speculators in the industry.
"Let me first make clear that there is no problem with supply," he said. "The rise [in crude prices] is due to the devaluation of the dollar, geopolitical tensions [in the Middle East] and speculation."
The Libyan OPEC chief, who has been attending the World Petroleum Congress in Madrid which ends Thursday, continued: "In reality it is very easy to explain. Last summer's subprime crisis in the United States caused a lot of harm to stock markets, and since then financial investors have been looking for other products and raw materials are now the most attractive commodity for speculation."
The OPEC head disagreed with a statement made on Monday by BP CEO Tony Hayward, who dismissed as "a myth" allegations that speculators were behind steep crude prices.
"I can answer back in the same way," he said. "Lack of supply is a myth."
El-Badri denied that OPEC member countries were placing obstacles in the way of foreign companies to stop them from investing in their countries. "There are many [countries] that maintain their doors open to [outside] investments by private companies," he said.
"And some of the countries of these private companies are keeping their doors shut. Eighty-five percent of offshore areas are off-limits in the United States."
El-Badri said that OPEC, the only Third World organisation that has been able to exert economic pressure on the developed world, produces 40 percent of global crude output and is presently investing USD 160 billion in exploration and production projects.
"For example, BP, could try to invest more in order to extract more oil from the North Sea," he said. "Nobody is waiting in line to purchase oil. We do not think there is a shortage."
A recent decision by Saudi Arabia to raise output by half a million barrels per day is a good example that there was enough oil to plug burgeoning demand, he said.
If, as El-Badri claims, speculators are fuelling higher oil prices, then it is only a question of time before the bubble bursts, forcing global prices to plummet. "If the market behaves according to supply and demand, prices will retreat," he explained.
"If we leave the market to the speculators, one day they will say the price will hit USD 140 and on another USD 200, and panic takes over the market."
Speculation, El-Badri continued, was making a lot of people rich. "I'm not recommending that we should get rid of the speculators in the market. What I am saying is pipe down - let's allow supply and demand to play out their roles. That is how the market should work."
He sees hydrocarbons-poor Spain, among others, as a victim of the speculation. "In my opinion, we should place some restrictions on speculators."
And the OPEC head believes that higher global crude prices are not making oil-producing nations richer since "over 85 percent" of the revenues made off oil goes back to the consuming countries through exports to OPEC member states.
El-Badri attacked US Congress plans to punish OPEC for not being able to keep up with world oil demand.
"I wish that the most powerful country in the world would stop harassing OPEC countries," he concluded, adding that boycotts against countries such as Iran and the geopolitical quagmire created in Iraq have caused global oil output to fall daily by "five or six million barrels."
[El Pais / Alejandro Bolanos / Eugenia de la Torriente / Expatica]