The world needs a stable oil price, which allows producers to manage their national budgets and which consumers can find acceptable. For about three years, the price has been stable at $110 (Dh404.58) a barrel, but it has now crashed to below $60. This is very good news in the northern hemisphere where the winter is starting and the fuel bills will be much less than expected. It is also good news for the suffering global economy, which is not recovering under various programmes of quantitative easing and will enjoy the benefits of cheaper energy. However, the low price is very bad news in over-committed oil producers like Russia, Iran and Venezuela, though many in the global community do not mind putting extra pressure on such wayward governments.
Nonetheless, all agree that the price of oil is far too important to be allowed to swing wildly from very expensive to very cheap and that jumping wildly between a possible range of $40 to $120 is bad for global confidence. Therefore, finding a way to stabilise the price is important. Two days ago, at a meeting in Abu Dhabi, leading Organisation of Petroleum Exporting Countries (Opec) producers Saudi Arabia and the UAE were very clear that they should not be blamed for the fall in price. They said that the real problem was large volumes of ‘new oil’ coming into the market, specifically from US shale projects. This ‘new oil’ has flooded the market and driven the price down and this is where Opec suggests that an answer to how to build a stable price has to be found.
