Business | Oil & Gas
Regional countries cannot be blamed for oil crisis
The violence of Iraq is a by-product of US-led invasion in 2003. Rebels attack Iraq's oil infrastructure on a regular basis. Attacks on pipelines are also common in Nigeria, another major oil producing nation.
- By Dr Jasim Ali, Special to Gulf News
- Published: 00:15 June 29, 2008
The violence of Iraq is a by-product of US-led invasion in 2003. Rebels attack Iraq's oil infrastructure on a regular basis. Attacks on pipelines are also common in Nigeria, another major oil producing nation.
To be sure, oil producing countries, notably Opec members, are pumping at full capacity. Saudi Arabia plans to raise output by some 200,000 barrels a day to 9.7 barrels in July. This comes on top of additional 300,000 barrels per day announced in the past few weeks. Still, Saudi oil minister Ali Al Naimi advised that his country would be willing to enhance output by as much as 2.5 million in the future to meet demand if necessary. Saudi Arabia has a plan to invest billions of dollars on further developing its petroleum infrastructure notably production capacity.
Undoubtedly, rising oil prices is partly responsible for ever-growing inflationary pressures across the globe. Worse yet, the past few weeks witnessed demonstrations in numerous countries with protestors demanding solution to the inflation epidemic. Not surprisingly, economists regard inflation as the single most dangerous development for any economy, worse than unemployment. Such is the case because inflation adversely affects all, albeit at varying levels. The same does not hold true for unemployment.
At the Jeddah meeting, Saudi Arabia proposed creating a $1 billion Opec fund and offered $500 million in soft loans to help poor countries cope with relatively high oil prices. Also, Saudi officials called on the World Bank to undertake an initiative to help poorer nations paying for increases in oil prices.
As a commodity, oil is traded on international financial markets. It is suggested that speculative trading practices are partly responsible for instability in oil prices. It is against this backdrop that the final communique called for greater transparency and regulation in oil dealings.
Little can be said about the level of consumption tax imposed on petroleum products, as it is a sovereign decision. All said, Saudi Arabia deserves a credit for bringing together stakeholders in the oil business.
Opec members used the meeting to fix the blame for the unusual price hike on elements beyond their control.
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