Calmly carrying on with our mission

OPEC Bulletin Commentary March 2019

In the early and mid-20th century, when resource-rich oil producing countries in the southern hemisphere dared to raise their voices to express concern over the unilateral pricing decisions imposed by the dominant oil majors of the time, they were routinely told to quiet down. Their only role, they were told was to simply provide access to the oil fields on their lands.

They were generally told to not worry; to be grateful that powerful and prestigious international companies were even interested in engaging in business with them. And if they didn’t like the terms of the contracts, or the conditions, or the treatment they received, they were warned that they would be left without income.

It was this kind of treatment that inspired the Founding Fathers of OPEC to gather quietly, calmly, on the sidelines of the First Arab Petroleum Congress in Cairo in 1959 — and to begin to brainstorm ways to change the status quo. Several articles in this edition of the OPEC Bulletin provide further details about that foundational meeting and the genesis of what would eventually become known as OPEC.

The impact of that preliminary meeting and the Organization that it eventually gave rise to has been much documented. It was an important act of self-assertion that somehow seemed to match the tenor of the time, with the winds of change and national sovereignty sweeping the developing countries of the world. The Founding Fathers and the early members of OPEC were driven by an overriding concern for the national interests of their respective countries.

They certainly never showed or displayed anger or stress or worry. They calmly, professionally, steadily discussed, took notes, strategized — and proceeded with the creation of what would be their legacy: the Organization of the Petroleum Exporting Countries.

So now, when the Organization is expected to “take it easy”, one could be forgiven for thinking that it sounds quite reminiscent of the way the oil majors used to treat the oil-rich countries of the developing world. The irony is that 60 years ago, the pressure was on producers to abide by whatever prices the ‘Seven Sisters’ decided; while today, even though pricing is generally determined by the fundamentals of supply and demand, the pressure is still on producers — so that they may ensure price extremes are avoided.

This kind of pressure is driven by a basic misunderstanding of the determinants of pricing on the part of both the media and consumers. And thus, one of OPEC’s ongoing challenges is ensuring transparency of information and informing the public as to the Organization’s role in the global oil market.

Perhaps it is appropriate to also, once again, assure markets to remain calm. The reality is, if there were one message to give to consumers and the industrialized countries of the world when they are concerned about rising prices, it is that they needn’t worry. We are very far from seeing the kinds of price volatility that has characterized the market during at least six different price cycles in the past half-century.

Perhaps it behooves us to remind consumers and the world’s largest economies that vigilance remains one of our watchwords, and that with the work and input and analysis of the Joint Ministerial Monitoring Committee, supported by the work of the Joint Technical Committee, OPEC and other non-OPEC producers are keenly aware of price trends and the momentum in the market.

In addition, it is worth remembering — and also worth reminding others — that OPEC has consistently, over its 60-year history, stepped in at critical moments and taken decisions and implemented actions that have ameliorated conditions for everyone — not just producers but consumers, the industry and the global economy. In short, there is no need to panic.

In 1939, on the eve of World War II, the British government produced a simple motivational poster whose aim it was to increase the morale of the public. “Keep calm and carry on” was the message. But it was not well distributed at the time, and then quickly passed into oblivion. In 2000, when a copy of the poster was ‘discovered’ in a small bookshop in England, it quickly became famous — and now, the slogan is seen on all sorts of items and merchandise, and variations on its wording have also appeared, some humorous, some more poignant.

We refer to this little historical detail not because of Anglophilia or a preoccupation with ephemera from bygone decades; we refer to it because its once forgotten message, recently re-discovered, is an apt reminder that no matter what the vicissitudes of the market bring, there is no reason for worry. Remaining calm, as OPEC’s Secretary General has consistently demonstrated, is important.

Regardless of what unexpected ‘black swans’ appear on the horizon — whether disruptive weather patterns and storms, or geopolitical occurrences — OPEC shall always be ready, able and willing to take decisions and implement actions, along with other producers. “Relax and take it easy” should be heeded by all who feel a weight on their shoulders.

OPEC Bulletin March 2019

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