Keeping an eye on everything

OPEC Bulletin Commentary August 2007

Wouldn’t it be great to have an accurate handle on the future? Yet even though the human brain is described by many as a miraculous and magical creation, it is not a crystal ball and none of us have 20:20 vision. It means that we all require the best available information and data to make the most accurate judgments and decisions about any short-, medium-, and long-term futures.

This is notably apparent in the oil industry, where data and information are the heartbeat of any decision-making process. All stakeholders need to take into account every facet of the industry and this is something OPEC places much credence on. It’s not about keeping an eye on some things; it’s about keeping an eye on everything.

The focus is on maintaining a supply and demand equilibrium. This is what OPEC’s actions, and its actions throughout history, have aimed to achieve. This balancing act needs to take into account both upstream and downstream, including actual crude supply and demand, oil inventories, economic growth, current and future investments, prices, refining bottlenecks, available spare capacity, speculation on futures exchanges, typical seasonal differences and the various timeframes. All the data and information pieces have to be fitted together like a jigsaw, to elicit the best way forward. Though, as we have seen in recent years, unforeseen happenings, such as geopolitical events, can play a significant role too.

For OPEC, this means utilizing the broad expertise of its Secretariat and the inputs from professionals in OPEC Member Countries, leveraging the feedback from its Economic Commission Board, and helping develop various outside fora. The latter includes the Joint Oil Data Initiative (JODI), based at the International Energy Forum (IEF) in Riyadh, Saudi Arabia, of which OPEC is extremely proud to have played a significant development role. The initiative has quickly evolved into an internationally-respected initiative focused on advancing the transparency, quality, timeliness and flows of energy market data.

The analysis and evaluation provide indicators as to how the energy landscape may evolve and many of the findings can be viewed in OPEC’s numerous publications, including the Monthly Oil Market Report (MOMR), the World Oil Outlook (WOO) and the Annual Statistical Bulletin (ASB). And on top of this, they also form an integral part of the Organization’s decision-making process and underscore that OPEC has, and will continue to monitor global oil markets closely and remain vigilant to any changing circumstances.

It all points to the need to be flexible and adaptive over all the various timeframes. From OPEC’s viewpoint, the Organization’s commitment to ensuring order and stability in the international oil market, with secure supply, reasonable prices and fair returns to investors, is unequivocal. Alongside this, a broad, practiced commitment from all players in working towards such stability is also imperative.

That is not to say that everyone will agree with every decision made by the various stakeholders. We do not live in a uniform society and the key term ‘energy security’ means different things to different people. Yet the concept is so essential to life in the 21st century. It is important that as an industry we all appreciate the role energy plays in the lives of many varied stakeholders: oil producers and consumers, oil exporters and importers, the people of developed and developing nations, and present and future generations.

Energy security impacts us all and any decisions must take this global outlook into account. The concept of energy independence is just that, a concept. It bears little relation to the realities on the ground. It is energy interdependence that is the guiding light.

At OPEC we recognize the importance of a holistic view and it is critical that as an industry we push forth inclusiveness and continue to develop and explore existing and new avenues of cooperation with innovative thinking, collaboration, timely adaptation and swift action. Clear, concise and timely information, covering all the various industry’s components, is the backbone of any decision-making process.

This Commentary is taken from the July-August 2007 edition of the OPEC Bulletin, which can be downloaded free of charge in PDF format from the OPEC website.

OPEC Bulletin (July-August 2007)

Download document