Straits Times 17 Nov 07
RIYADH - THE Organisation of Petroleum Exporting Countries (Opec), benefiting from this year's 53 per cent oil rally, has never been so powerless at reducing the cost of energy, risking a consumer switch to other sources, oil ministers said.
Prices have rallied 20 per cent since the group's last decision in September to boost output. Opec oil ministers, including Venezuela's Mr Rafael Ramirez, say there is no reason to raise supply further at a Dec 5 Opec meeting because inventories are adequate.
'Opec can't do anything about the price,' Mr Ramirez said yesterday in Riyadh, Saudi Arabia, where Opec is holding a heads of state summit this weekend. Oil prices may reach US$100 a barrel soon and Opec can do very little about it, he said.
Crude oil in New York rose to a record US$98.62 a barrel last week because of concerns that supplies may fall short during the northern hemisphere winter. Prices have also risen on concerns over supply disruptions in producers such as Iran and Nigeria, and as investors turned to commodities as a safe haven from other financial markets and a falling US dollar.
'Opec is finding itself a victim to movements on equity markets,' Mr Daniel Yergin, chairman of Cambridge Energy Research Associates, said in Riyadh. 'It is perplexing to have the oil price change several dollars a day, when one is thinking about 15-20 year investments.'
'High prices so far have limited impact on demand, however we can't remain complacent, this high price is potentially dangerous,' Opec president Mohamed al-Hamli said yesterday in Riyadh. He cited the example of the 1970s 'when the electricity industry switched away from oil'.
At the summit, Opec plans to reject United States calls to increase production, according to a draft of its statement to be released this weekend, three Opec officials told Bloomberg yesterday, on condition of anonymity.
The group will instead reiterate its commitment of stable supply and invest in technology to cut carbon dioxide emissions from oil and gas in a bid to remain a primary energy provider in a world more aware of climate change.
'They will be grateful for high prices and hope that alternatives to oil are not encouraged too much since there is very little they can do in the short run to send prices lower,' Mr Adam Sieminski, chief energy economist at Deutsche Bank in New York, said in a Nov 12 interview.
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