Don’t
Worry The Price
Per Barrel Is $100!
By Dr Marwan Asmar
09 January,
2008
Countercurrents.org
Don’t worry the price of oil—currently hovering at around $100 per barrel—‘is not very high’—but is likely to go higher if we take into account the oil demand, production costs and inflationary pressures. These are not the expressed views of the man-in-the-street, but that of the current rotating president of OPEC (Organization of Petroleum Exporting Countries) Chakib Khelil. He’s is a happy-go-lucky attitude since his country stands to benefit much from the new bounty of revenues, at least in the short-term.
But so as to calm everyone’s nerves, he is playing down the current price hikes, saying they are not very high in real terms, in fact they are not higher, and about the same as the oil prices that existed just prior to those of the 1980. That maybe so for the expert economist who looks at life in terms of balancing the books, but trying to convince the poor and middle classes is a different matter; they only know what’s in their pockets, and it has certainly no bearing to the current cost of a barrel of oil. If oil prices stay at this level, and spiraling, theses people are to be flung further and further on the poverty heaps.
But with an international body politic full of complexities, trying to search for black-and-white solutions and answers we seek to blame the first in line. The argument that it is China and India responsible for higher oil prices is always being put forward as convenient scapegoat. They are seen as the culprits because of their need to steam roll their economies currently waving the flag of economic development and refusing to stop even at the expense of over-heating.
Oil analyst
say on the whole, yes, it is them who are fuelling prices because
of their insatiable demands for their growing industries; and the
fact India has a considerable number of poor people and not related
to the oil price rises is neither here nor there.
And regardless, OPEC countries or most of them may be delighted as
the “thank you very much” higher oil prices are daily
lining their state coffers for development and maybe pink elephant
projects, with their citizens certainly getting some of the bounty.
The Gulf today is awash with newly mint-rated petro-dollars that is
once again reviving their flagging fortunes as low oil prices characterized
most of the 1980s, 1990s and up to the early part of this decade.
The argument was always that lower revenues were being pumped into
their state coffers because of low oil prices, but today it is no
more.
After about 2004, oil countries have come to experience a new “oil
revolution” with money right, left and center moving into their
hands. Although not everyone may be head-over-heels about the new
oil revolution. While oil countries with low population like Kuwait,
United Arab Emirates and Qatar maybe benefiting, this is certainly
not the case of oil countries with large populations, including Indonesia,
Venezuela, and Mexico as well as Saudi Arabia, Iran, and Algeria included.
Despite
the fact that some of these countries would look at the short-term
revenue-accruing benefits, higher oil prices mean higher international
inflation rates, higher prices of domestic goods and the “thining”
of their expenditure to cover higher population numbers.
Although Saudi Arabia can’t certainly be put in the same league
with the previous states, it’s economy is under increasing stress.
However, Saudi Arabia, the country with the highest oil reserve capacity
is seen as a swing producer or a balancer and its decision-makers
say it has to think locally, globally and even regionally. On the
whole however, it may not be in favor of too a steep oil price but
not too higher one either.
With remarks made recently by its Oil Minister Ali Al Naimi saying OPEC can’t determine prices as they are influenced by the international markets, it can be suggested Saudi Arabia is not necessarily against the current higher oil prices despite their implications for the international economy because the Kingdom also needs to continue to implement its development projects, try and balance its strained budget and other fiscal policies.
What that suggests also is there is a new hardnosed approach to development dominated not just by higher oil prices but higher prices generally that states are prepared to live with regardless of the social damage it may create in different parts of the world because it is not simply a question of supply-and-demand as there is no global shortage of oil that is leading to higher prices.
Analysts say the world oil market is no longer controlled by cartels like OPEC as it was once, it’s fluid and dynamic largely because of the existence and the emergence of other oil producers among whom include Britain and Norway not to mention the United States and Russia who may occasionally pump to balance global production.
So is it just a question of the world needing more oil simply because it has gotten economically bigger and needs to be kept developing regardless of the devastating effects to the environment and the green house gases.
That would certainly downplay the China-and-India blame argument for oil prices and the development issue in an expanding Europe receiving more growth-obsessed states, Russia and United States, which refuses to sign the Kyoto Protocol, must take a large share of the blame for the current situation.
And notwithstanding the above today analysts say there are additional significant political factors responsible for the latest oil hikes which presently include political strife in Pakistan, violence in Nigeria and low oil inventories in the United States.
Judging from that, there will always be negative political factors that will continue to be blamed for higher oil prices, unless of course there are pressing economic situations which many may find difficult to ignore. What is for certain however, is that oil prices will continue to go up this year as predicted, but what is alarming is that nobody seems to be giving too hoots about that either.
The author, a media consultant in Amman, is the Responsible Chief Editor of the monthly Jo Magazine. He has an MA in development studies and a Phd on the State and Politics of Labor Migration in Kuwait. Both are from Leeds University in the UK.
