Opec ministers were in a belligerent mood as they gathered in Caracas, Venezuela, this week for the summit meeting that will mark the 40th anniversary of the oil cartel’s founding. Buoyed by what has been most steady rally in oil prices in a quarter of century, they were still offended by what they consider to be unwarranted criticism from consuming countries over the cost of fuel.
Contrary to what many Western governments hoped, the participants at the meeting were adamant that they were not in Caracas to discuss increased oil production. The aim of the summit, they stressed, is to discuss general policy issues, including cooperation in oil-related projects by member states. In fact, one of the goals is to agree to meet in such a forum every five years. This is only the second time since 1975 that the notoriously splintered Opec membership has sat down together, in one place at the same time.
But, while the Opec members were reluctant to be distracted by every-day issues such as the current price of oil, the same could not be said of the Western governments. For as Opec came together in Caracas, finance ministers from the leading industrialized countries gathered in the Czech capital of Prague, for a meeting of the World Bank and International Monetary Fund (IMF).
In Prague, the G7 ministers expressed their concern that expensive oil would push inflation rates upward and reduce world economic growth. Reportedly, the 0.4 percent rise in the German cost-of-loving index in September was almost exclusively caused by higher fuel prices. According to the Organization for Economic Co-operation and Development, if the price of oil holds steady at $33 per barrel, Japanese and European and Japanese growth would both dip by one-fifth of a percentage point, and one-tenth of a percentage point would be sliced off the United States’ GDP.
But Opec members are unmoved. When, just one year ago with oil costing $10 per barrel, the Opec countries’ economies were in the doldrums, the noted, the high-flying Western countries were reluctant to spread the spoils. The Opec countries should focus first and foremost on their own needs, the members said.
Another popular theme was the alleged hypocrisy of Western—and, more specifically, Western European—governments, which the Opec members claim often earn more in taxes on a barrel of oil, than they themselves do in direct income from crude oil sales.
Britain’s prime minister was a popular target in this respect. "When I hear Mr. Blair say ‘I won't touch taxes because it will hit spending on education, or health’—I am not convinced,” said Algerian Oil Minister Chakib Khelil, quoted by the AFP news agency. "He can reduce tax structure without touching spending.”
For its part, the IMF has advised Western government against such cutting fuel taxes, saying that they should no do so unless they are able to make up for lost revenue elsewhere. Several European governments had harbored thoughts of such moves in the face of protests by truck drivers over the rising cost of fuel.
For his part, Rilwanu Lukman, the Opec secretary-general, was not even prepared to consider giving in to Western demands. "We are not going to allow ourselves to be pushed into putting more oil than the market needs,” he said, speaking to a press conference in Caracas, before summit got underway. “The last time we did that, the price went down to 10 dollars a barrel,"
Opec recently announced an 800,000-barrel-per-day increase, the third production hike of the year. It will only take effect on October 1, and before making any more decision about production increases, the organization says it will wait and see if the oil price stays above the $28-mark. At least officially, Opec states that it would like to see the price steady about $25 a barrel.
Speaking before the summit, the host of the event, Venezuelan President Hugo Chavez, said that consumer nations must get used to paying fair prices for oil. Casting an accusing eye over his Western critics, he insisted that it was oil producers that had been exploited, and not the other way around. – (Albawaba-MEBG).
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