Oil is certainly not to be blamed for economic crisis

In a recent interview before the Group of Twenty (G20) meeting in London, I was asked if the participants will fall heavily on the Organisation of Petroleum Exporting Countries (Opec) and blame the organisation for the world economic and financial crises.

I immediately said no because Opec this time is probably the only entity that can easily escape the blame. The final communiqué of the meeting did not even mention oil and even the meeting of the G20 in Washington in November 2008 was free from any statement on oil production or prices.

This is not to say that in the discussions oil was absent but it certainly was no reason to blame. Opec and oil exporters in general do not own the failing big banks or near bankrupt companies and Madoff is certainly not the treasurer of Opec.

Those who kept drumming the oil issue in their public statements such as the former US president George W. Bush, before the 2008 meeting, were obviously trying to divert attention from the real problems and their role in creating them.

The participants in the G20 meeting knew very well Opec's effort to cool the market and its striving to supply all the necessary volumes in the years of rising oil prices up to July 2008.

Obviously Opec cannot accept very low oil prices not only because of their impact on its development and the welfare of its members, but also because of the need to continue investment in new production and facilities to supply the market when the crisis is over and oil demand growth is resumed.

This is why the current stabilisation efforts of oil prices at their realised level are important even though the loss of volume is hurting. By accepting the current level of oil prices since the end of 2008 which meant the loss of almost $100 (Dh367) a barrel, oil producers have contributed heavily to easing the econ-omic downturn at the expense of billions in forgone revenue and disruption of their plans and budgets.

Some people saw the G20 meeting as a responsibility and others saw it as an opportunity. I thought it was both.

It was also an opportunity to foster more cooperation among nations and to understand that the needs of some groups are not necessarily to the detriment of others.

If the free market is our fate, then let us remember the need to adhere to tighter rules and regulations that will insure avoidance of failure and mismanagement of institutions. I agree with the Prime Minister of Britain, Gordon Brown, that the markets need ethics and if the oil market is not excluded then it is important for Brown and the consuming countries to stop the discrimination against oil vis-a-vis other energy sources and to review their taxation policies on oil products where they are making more revenue from oil than the oil producers.

In the same interview, I was informed that some sources are after changing the structure of the oil market and I said yes, let us go back to the fixed price system where oil prices can change by factors of inflation and the value of the dollar every now and then as Opec tried so hard to achieve in the 1970s to no avail.

Yes, let us abolish the futures market and its casino like atmosphere or at least let us curb its activity and allow only oil entities to participate and not just any-body with money to risk for a quick gain.

Yes, let us sell oil only to governments and refiners or traders acting on behalf of them and not allow a shipment of oil to be sold multiple times before it reaches a final destination.

If the consumers desire such changes to the structure of the oil market, I am sure the producers will be more than happy to accommodate them.

But let us be realistic, the free and unbridled market is religion to the developed countries and oil producers have come to live with that for a long time now.

Producers should make the best of available opportunities without dreaming about mechanisms that are unlikely to come soon.

- The writer is a former head of the Energy Studies Department in the Opec Secretariat.