VIENNA: OPEC snapped back at the International Energy Agency (IEA) yesterday over its assessment that oil prices of around $40 a barrel would be good for the global economy.
“The IEA has said that the world would get a trillion-dollar economic stimulus if oil prices stay at around $40 a barrel through 2009,” the head of the Organization of Petroleum Exporting Countries, Abdalla Salem El-Badri, said in a statement.
“The moderation of prices since last summer’s extreme certainly offers some short-term relief to consumers. However, if the current low price environment persists, this short-term relief may not translate into long-term gain,” El-Badri argued. “We all want to see the global economy back on its feet as quickly as possible,” the organization chief insisted.
But “oil prices need to be at levels to help sustain economic growth by supporting longer-term energy industry investments across the board. Low oil prices inevitably mean less investment,” he said.
Yesterday, New York’s main futures contract, light sweet crude for delivery in April, was at $44.71 a barrel and Brent North Sea crude for delivery in April stood at $44.33, way below the record highs of around $147 seen last July.
Saudi Arabia, the leading producer in the Organization of Petroleum Exporting Countries, has estimated that a price of around $75 would be “fair.” Even the IEA, which represents industrialized oil-consuming countries, had recognized that a lack of investment now by OPEC “threatens a supply crunch around 2013, and a price surge,” El-Badri said.
IEA’s position was therefore “confusing and misleading: Whilst asking for prices to remain at $40, it also wants investments to be made that are not economically viable at these prices. It is a short-sighted view,” the OPEC chief said.
“OPEC remains committed to ensuring a stable, sound and sustainable oil industry, and upholding its investment plans when it makes business sense.” El-Badri also took issue with the IEA’s admonition to the oil organization to “watch carefully the market and make proper decisions” before cutting supply. “OPEC always makes informed decisions,” the oil chief retorted.
“They are taken following careful analysis of all the various inputs, and in the interest of market stability.
And this will be the case when OPEC meets again on March 15.” OPEC will convene next weekend for a one-day meeting in Vienna to discuss whether a cut in output could help boost prices. The organization has repeatedly cut production since September, and OPEC ministers have signaled a further cutback on March 15.
