Another Milestone

OPEC Bulletin Commentary June 2005.

June’s historic meeting between OPEC and the European Union marks yet another milestone in the pursuit of co-operation and dialogue between oil producers and consumers.

This is precisely the kind of contact that OPEC has always supported over the years. It has championed the need for OPEC/non-OPEC co-operation, as well as dialogue with consumers and these efforts have borne fruit, for example, in the establishment of the International Energy Forum.

Now, through the creation of a proper framework for talks to take place with the EU — OPEC’s largest trading partner — both parties have agreed to study many of the complex issues that surround the international oil market and explore ways of addressing them jointly.

Both parties stand to benefit: for the EU, this important new initiative is seen as part of a broader approach to strengthen energy dialogues with the main oil and gas suppliers; and for OPEC, this is a significant further step in its continued efforts to encourage dialogue and co-operation among oil producers and consumers.

Both have recognized the importance of an effective framework enabling an exchange of views on energy issues of common interest, including oil market developments, and the potential this has for contributing to stability, transparency and predictability in the international oil market. In addition, they have agreed on the importance of greater data transparency and an enhanced exchange of views on trends in supply and demand, future policies and their implications, technology developments and other related issues.

Both shared the view that oil price increases over the last year were the result of the convergence of a number of factors. Also, while acknowledging OPEC’s response in raising output and speeding up the implementation of capacity expansion plans, the participants nevertheless recognized that uncertainties, particularly associated with the level of future oil demand, will remain substantial.

It has become clear that producers and consumers cannot operate in isolation — a belief OPEC has held for many years. It is only by engaging directly with consumers and governments and institutions about the oil market that stability can be secured.

As the decision in June to raise the production ceiling demonstrated (see page 8), OPEC is prepared to do whatever it can to address market volatility. However, it cannot be reasonably expected that OPEC bears this responsibility alone — that is why co-operation is so important.

This Commentary is taken from the June 2005 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin (June 2005)

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