Abu Dhbai: The structure of the oil market and its pricing system must be changed to satisfy the needs both of the Organisation of Petroleum Exporting Countries (Opec) and Russia, the single largest oil producer in the world outside Opec, a Russian energy expert said at an industry conference here yesterday.
Speaking on the final day of a three-day conference "Energy Security in the Gulf — Challenges and Prospects" organised by the Emirates Centre for Strategic Studies and Research (ECSSR), Professor Nodari A. Simoniya, Director of the Centre for Energy Studies, Institute of World Economy and International Relations said there have been calls for Russia to join Opec, but this was not a solution.
"What is needed is a round-table of producers and consumers to reform the marketing of oil. It will take time and effort to change the attitude of some, particularly the United States," Simoniya added.
He said Russia could not join Opec because the structure of its oil industry is different from those of Opec members.
"After the fall of the Soviet Union, the oil sector was privatised and became fragmented. With so many oil companies engaged in so many joint ventures, the government cannot impose its will on these diverse companies. Furthermore, these companies lobby the government heavily and corruption is rife," said Simoniya.
He said historically, the US guaranteed its sources of energy by diversifying the sources of its oil imports away from Opec.
"This seems to be a bigger reason for the cause of Opec's loss of revenue rather than Russia's oil production," said Simoniya.
He said the world financial crisis has had an impact on the relations between Opec and Russia.
Separately, Simoniya said global oil prices currently hovering in a range of $75-$78 per barrel are due to speculators driving the oil markets rather than the forces of demand and supply.
"A half-year study in 2008 of day-to-day activities in the oil market showed that oil demand was in fact flat. At the same time, it revealed that investor behaviour in the futures markets increased threefold. When the government began to take action, $40 billion of speculative money left the oil market and prices collapsed. This has become a real problem," he added.
Professor Philip Andrews-Speed of the University of Dundee said China and India would drive Asian oil demand in coming years.