The fifth international conference of IIES, with the theme of the "Impact of the Middle East Oil/Caspian Sea on the Global Energy Markets", is being convened when the world oil market is faced with a peculiar and unprecedented situation, characterized by following features:
1) Despite few times of increase of output by OPEC, the world oil prices are still at relatively high levels and there is yet room for further rises.
Ironically statistics show a surplus of supply over demand while stockpiling continues unabated.
2) Despite the surplus in supply and continuation of stock building, if the global economic growth does not slow down, the world oil market will face many disturbances in the next few years. The reason is clear.
On the one hand, the non-OPEC production has reached its peak and on the other, there is hardly any significant excess production capacity left within OPEC.
Save for the limited excess capacities of Saudi Arabia and UAE, other OPEC members are pumping out to their maximum. Lack of real excess production capacity has left the global oil market vulnerable.
Any production cut back by any producer in the world, particularly by any one in the Middle-East, can not be easily compensated for.
This can severely limit political and military maneuverability of the U.S. administration, particularly in the Middle-East.
3) The world market is faced with constraints in refining capacities too, especially for producing middle distillates. Refineries are not capable of supplying fuels with acceptable standards, and environmental considerations have further exacerbated the situation.
Under the circumstances the real prices of petroleum products pull the crude prices up and any further production of crude will not help resolve the problem.
4) The ever increasing dependence of the United States on the imports of crude along with the problematic logistics and transports of the incoming volumes coupled with the refining constraints, are the main factors responsible for the price hikes of oil and its products.
Having mentioned above factors, one can now examine the reasons for the current situation in the global oil market.
One finds no other factor more effective than the wrong policies and strategies of the U.S. in bringing about what the world oil market is now facing.
After the first oil shock of 1973 (regardless of the real reasons behind it) and the ensuing formation of "International Energy Agency (IEA)", the policies of which entitled the U.S to keep a finger on its pulse, Europe and Japan sat passively aside allowing America take care of their energy security.
The U.S, with vast domestic resources and across its borders, was naturally less susceptible to any eventuality and could therefore easily afford to tie up the issue of oil with that of its strategies planned for political and military expansionism.
In the bargain practically ignoring the interests of other members of IEA.
Reflecting on what Henry Kisinger (the secretary of state of the time) had to say in February 1994 during an energy gathering in Washington, which turned out to be the starting point for the foundation of IEA, one will grasp the main pillars of policies adapted by the Agency in the past 25 years. This long experience is a good tool to evaluate successes, if any, of the said policies.
It is not intended here to pass judgment on all aspects of the policies but few:
1) American policy has been in the direction of mitigating dependence on the oil of Persian Gulf.
This policy has been inextricably intertwined with the U.S. policy of powerful presence in the region.
For decades, Americans have contributed heavily to the instigation or intensification of tensions in this volatile and important area.
This policy had, on the one side, prevented the needed and timely investments for the countries of the region. On the other has practically destroyed a significant part of existing capacities of the vicinity.
The prevailing situation and all forecasts for the next two decades indicate that the U.S policies for the area haven short sighted.
For, the global need for the Persian Gulf energy resources is on the rise, while the stumbling blocks, to meet the future world demand, are many.
2) The real prices of oil were kept low for a considerable period (more than fifteen years). This along with price fluctuations plus the formation of other lucrative investment opportunities, managed to prevent the needed capital investments in time for the aging oil industry worldwide.
Although for the past year and half the prices have gradually attained an acceptable level, nevertheless, currently certain irrational conducts combined with contradictory statistics and reports have deprived the global oil industry of making determined decision on very basic investments.
3) The unwavering opposition of the U.S to a serious dialogue between producers and consumers, particularly about crude oil pricing mechanism, has forestalled well coordinated and rational decisions for ensuring a long term secure supply of the global need for oil.
Realization of which requires cooperation rather than destructive rivalry.
4) The U.S led oil embargoes against some nations along side imposition of limitations on some others, based on the said policy, have stopped the energy potentials of those countries from actualization. Which in turn has deprived the world of secure supply.
5) And finally the expansionist strategies of the U.S, based on energy resources, for the Central Asian nations have practically forestalled the optimal utilization of those, albeit limited, resources.
The dictated routes for their transfer are by no means viable economically. In the past America has spared no effort in blocking all other possible routes for the purpose.
Also in embargoing some oil rich countries, the U.S had intended an indirect promotion of investments in the Central Asia. Reflecting back, it is now clear that the consequences of such an ill-thought policy are many.
But the U.S administration seems to have failed to realize this and is as yet following the same scenario heedlessly.
Though it is worth noting that almost all the major American oil companies have a sound grasp of the situation and are unanimous in opposing the already flunked policy of the U.S administration.
In view of the points high lighted above, a long lasting solution to the global oil market problems lies in a fundamental change in the policies of IEA.
Western Europe, Japan and the majors must concentrate on convincing the U.S of the impracticality of the past policies of the Agency.
And if they fail in persuading the U.S, then they must distance themselves from those methods and adapt independent strategies.
No doubt, a comprehensive dialogue between producers and consumers of crude oil has an unquestionable important place for the realization of which no opportunity should be missed.
The fifth annual conference of IIES, assisted by Iranian Association for Energy Economics (IAEE), could serve as a timely opportunity to reflect on the past unfavorable experiences and draw up plans for the future prospects.
Active presence of the major oil companies and independent analysts in the conference in Iran, with vast oil and gas resources, and with strategically important position can make the occasion doubly meaningful.
Source: www.iies.ac.ir
