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Opec Unites Behind Higher Prices Print E-mail
By Ed Crooks and Javier Blas in Riyadh, FT.com,
November 18, 2007

Opec leaders meeting at the weekend summit in Saudi Arabia have differed sharply over the group strategy and purpose, but have united in defense of high oil prices.

Hugo Chávez, the left-wing president of Venezuela, opened the summit welcoming oil prices at close to $100 a barrel, describing them as “fair”. He called for the group to be “an Opec for geo-politics, an Opec for revolution”, adding “Opec was born as a geo-political actor, not as an economic or technocratic bloc.”

He also reiterated his warning that oil could hit $200 a barrel if the US attacked Iran. King Abdullah of Saudi Arabia, the summit’s host, gave a very different view of Opec’s objectives, saying it was intended to protect both its members’ interests and the world economy, and praising the group for acting in a “moderate and wise manner”.


 

He also appeared to justify oil prices at their current levels, saying that taking into account inflation, prices were still “not yet at the level of the 1980's”.

The summit in Riyadh, Saudi Arabia, only the third in the group’s 47-year history, will not take any decisions on short-term production levels, which will be assessed at the next ministerial meeting in Abu Dhabi on December 5. It is instead intended to set Opec’s long-term strategy, focusing on securing a central role for oil in the world economy. The draft of the declaration to be issued on Sunday emphasizes priorities such as investment in production capacity and the need for consuming countries to provide assurances of future demand.

Abdalla el-Badri, Opec’s secretary-general, in his speech to the summit on Saturday, called for “transparency and predictability in consuming countries' energy policies,” to give oil producers the confidence to invest in new capacity.

The draft declaration also addresses climate change, in an attempt to show that rising consumption of oil can be compatible with tackling the threat of global warming. King Abdullah on Saturday announced that Saudi Arabia would put up $300 million for a new fund for environmental research, and called on other oil producing and consuming countries to contribute.

Mr Chávez wants Opec to take a much more active stance in world politics, recalling in his speech the “remarkable days of the 1960's and 1970's”. He said the objectives of Opec should be to “demand respect for our countries” and “ask the most powerful nation on earth to stop threatening Opec members”; a clear reference to Iran, whose president Mahmoud Ahmadinejad is also attending the summit.

Mr Chávez added: “If the US is mad enough to attack Iran the price of a barrel oil will be $150 or $200.”

Mr Ahmadinejad said after the opening ceremony that he agreed with Mr Chávez that $100 a barrel was a fair price for oil. “King Abdallah said the same: even $100 is less than it should be,” he said.

Iran has argued that the fall in the dollar means that in euro terms, the average oil price so far this year is lower than it was last year. Mr. Amadinejad declined to answer questions about Iran’s nuclear program, saying he would say more at a press conference on Sunday.

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