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Fault lines within OPEC "Why the big "reservist" Saudi, Iran, Iraq and Kuwait should be worried about higher oil prices?"
Oct 18, 2004, 22:06
Iqbal Latif
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Oil above $50- And no one is even partying!
During the first eight months of this year, the price of oil has risen to nearly $55 from just under $29. For the last 30 years, the price of oil has been the single most important determinant of the economy and the stock market. However, there is something amiss in this whole equation of the steep oil price rise. Whilst in the short term it provides opportunity, to me, in the long term, it sounds like a death knell for OPEC.
As I recently explained to an OPEC country oil minister, oil pricing is a two-edged sword, which is hard to manage. Let it drift too low and quota-cheating necessitated by the single commodity- dependent economies of OPEC take the bottom of the oil prices like, oil at below $10; keep it too high, long term impacts are disastrous. Thus, rich oil nations like Saudi, Iran, Iraq and Kuwait are caught up in a quandary. They need to maintain oil at a price that helps them grow their single commodity dependent economy to a multifaceted economy, but at the same time keep new producers and threatening new tech advance out of the contention. |
