Focus on OPEC in Golden Anniversary year

OPEC Bulletin Commentary March 2010

OPEC’s Ministers will be reflecting on the past, the present and the future when they come to their new headquarters in Vienna for the 156th Meeting of the Conference on March 17.

This year is the 50th anniversary of OPEC’s birth and a series of special activities has been arranged to mark the occasion. These include the launch of a new Website, the preparation of special publications, the issue of commemorative postage stamps, the organization of competitions and — reaching a peak closer to the day itself, September 14 — the holding of cultural exhibitions and a high-level symposium.

They will highlight OPEC’s achievements and the long way it has travelled since its almost unheralded birth in the very different world of 1960, when the powerful ‘Western’ interests controlled the world oil industry outside the former Soviet Union, with few returns for the oil-producing countries themselves. Underlying this will be the recognition that the Organization’s subsequent elevation to the role of a key player in the oil industry has been due to its steadfast commitment to a sound set of objectives, in the interests of stability and growth, benefiting all parties. The Third Summit of OPEC Heads of State and Government in 2007 reaffirmed this commitment, with its three guiding themes of stability of global energy markets, energy for sustainable development, and energy and environment.

The Ministers will also be examining the present outlook for the oil market at a time of continuing uncertainty in the world economy. There is the growing imbalance between OECD and non-OECD growth, as countries emerge from recession. There are fears of double-dip recession in some cases. There is the gathering debate about the extent and timing of exit strategies from the stimulus packages imposed during the crisis. And there is the realization that overheating in some emerging economies may lead to tougher stands on expansionary policies.

Oil prices themselves have held up well over the past five months within a range of around $70–80/barrel for the OPEC Reference Basket. OPEC’s decisions of December 2008 have played a part in this. For now, this price range seems to provide a practical working balance between the interests of producers and consumers. At the same time, however, there is still more talk than action about the introduction of effective regulatory measures in the financial sector. This is leaving oil, as well as other commodity sectors, exposed to new rounds of severe price volatility, which is detrimental to both the oil industry and the world economy at large. As we learned two years ago, no party gains from this.

Importantly, OPEC’s decisions require the support of other oil-producers to improve their effectiveness. The Organization has made no secret of the fact that it is disappointed by some non-OPEC producers looking to OPEC to act in the market when prices are down, only to back away from this and take a more laissez faire approach when the market outlook improves again. All parties benefit from a stable, healthy oil sector and so all parties must be prepared to contribute towards achieving this.

Turning to the future, the March 17 Conference will be the first one to be held in the Secretariat’s new building in Vienna’s central district. Indeed, the official opening by OPEC Conference President Germánico Pinto will take place on that very day, with the Austrian Foreign Minister, the Mayor of Vienna and other distinguished guests present. The state-of-the-art premises has been purpose-built to match the Secretariat’s specific needs.

Clearly, as it stands on the threshold of its second half-century OPEC is in sound shape to continue its mission to achieve lasting order and stability in the international oil market and support steady growth in the world economy. And the solid, sustained support of other leading parties in the industry in today’s high-tech, interdependent energy world will greatly enhance the effectiveness of this.

This Commentary is taken from the March 2010 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin March 2010

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