Taking a fresh approach to market challenges

OPEC Bulletin Commentary July 2009

Getting away from it all from time to time is essential, if we are to perform better in our chosen lines of work.

This gives us a chance to reflect upon our day-to-day lives and view things from a broader and more detached perspective than is usually possible, when absorbed in our regular affairs and routine activities.

Thus we have welcomed the arrival of the Northern hemisphere summer, when we can escape for a while from such matters and relax among family and friends.

Life, of course, has gone on in the oil industry during this period. But — save for a sudden or unexpected dramatic event — the dynamics have been more subdued. There are fewer meetings and conferences, there are not so many demands at the sharp end of decision-making, there is less call for intensive research and analysis, many staff are away and most centres of learning are closed.

Even though the well-aired, ‘hot’ issues remain — such as the high levels of speculation and price volatility — the seasonal lull permits more time for pondering over deeper, less fleeting topics.

Indeed, those of us based in Vienna were set on the path for this by two events that occurred in the OPEC Secretariat within a fortnight of each other in the final run-up to the holiday season.

The first was the 6th Ministerial Meeting of the EU-OPEC Energy Dialogue on June 23 and the second was the launch of OPEC’s third annual World Oil Outlook (WOO) on July 8, together with our latest Annual Statistical Bulletin.

While both events dealt at length with the impact of the current financial turmoil and widespread recession on the near-term oil market outlook, the overriding focus was broader than this and was aimed further into the future.

As the joint press release from the EU-OPEC meeting put it: “For both parties, it was axiomatic for the industry to maintain a firm focus on meeting longer-term challenges, in spite of the many hardships caused by the present world economic crisis.

“If this were not done, then the ability of the industry to invest in new production capacity to meet rising demand in future would be seriously impaired, and, among other things, this could lead to a perpetuation of damaging boom/bust cycles. This would benefit no one — neither producers nor consumers.”

OPEC Secretary General, Abdalla Salem El-Badri, in his foreword to the WOO, described it as “an important tool that helps further the common interest among all stakeholders for energy market stability, as we look to bring more clarity to the oil market and develop solutions and ways forward in the years ahead.”

In short, attending to the future is as important as attending to the present. We are all clear about that. The present and the future go hand in hand.

With this in mind, we have identified two specific topics for us to think about with the more relaxed, receptive, meditative and creative minds that come from ‘getting away from it all’. These concern areas that cannot always receive the desired levels of attention in our regular busy, stressful day-to-day working lives.

The first concerns the fundamental shift in the declared energy policy of the new United States Administration, as well as its explicit tie-in with environmental policy. If the Administration’s measures win the support of Congress and become law, this may turn out to have a profound impact on how the world economy, including the energy sector, performs for years to come.

The second topic is related to this and concerns the search for a post-Kyoto treaty in Copenhagen in December. The complex array of issues involved in this have been around for a long time and the particular platforms are well-known, highlighting, once again, clear divisions between the developed and developing worlds, when it comes to adopting practical, realistic, meaningful measures. Again, the outcome — if an outcome can, indeed, be found in the Danish capital — may have a big effect on the way mankind progresses in the coming decades.

When considered together, and taking into account other shifts in the global balance of interests that may be underway in the present fractured, jittery, unpredictable international economic arena, then clearly we can all benefit from the fresh visions and new insights that can come from relaxed and refreshed minds.

As oil producers and as developing countries, we must ensure at all times that we are fully integrated into the process of global change, in whatever shape or form it manifests itself, and that we have a sound grasp of the underlying issues and dynamics.

Extensive dialogue and sound research are fully supportive of this and will continue to form the cornerstone of OPEC’s policies and actions.

This Commentary is taken from the July 2009 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin (July 2009)

Download document