OPEC Divided Over Oil's Price Effect on Global Economy

by Armando Duke

Houston, TX - Members of the Organization of Petroleum Exporting Countries (OPEC) were divided over the effect of oil prices on the global economy with the host of the 141st Extraordinary Meeting of OPEC members in Caracas, Venezuela, Hugo Chavez, reminding members in his opening address that their countries were cash-poor before the cartel was created and that now they were enjoying the benefits of controlling global prices.

He also reminded OPEC members that when he took office, the price of crude was $7.60 per barrel and both Venezuela and OPEC's large producing countries were facing a deep economic crisis. "Oil was practically being given away," Chavez said. "The problem today is that OPEC has become an audience watching from a distance," said Qatar's Oil Minister Abdullah al-Attiyah yesterday. "Now the market is completely controlled by geopolitics and speculators."

Attiyah reiterated that the deficiency in the global refining capability is one of the main factors affecting the inconstancy of the oil prices. "Right now the market is sufficiently supplied," said Edmund Maduabebe Daukoru, President of OPEC on his arrival in Caracas. Daukoru dismissed the possibility of registering changes on the production levels.

"The price of crude oil in the market is due to downstream factors in the process, such as the refining process, added to geopolitical tensions and speculation," Daukoru said. The price of OPEC basket of eleven crudes stood at $64.93 a barrel on Wednesday, compared with $65.41 the previous day, according to OPEC Secretariat calculations. But in New York, crude oil prices were higher Thursday after enjoying a $2 per barrel drop Wednesday as traders grew alarmed over OPEC's hold over prices.

Light crude for July delivery was up 21 cents per barrel at $71.50 in late morning trades on the New York Mercantile Exchange. In London, Brent crude oil closed down 68 cents per barrel at $70.42. Unleaded gasoline in New York rose 7 cents per gallon to $2.16.

OPEC's agreeing to hold production levels eased traders concerns, though Iran's balking over Condoleezza Rice's statement in regards to holding talks with Iran over its nuclear program caused a knee-jerk reaction in the U.S. energy market Thursday after Iran refused to hold talks based on any preconditions. Rice said that the U.S. was willing to meet with Iran if it would halt uranium enrichment first and then only after it proved it was cooperating.

OPEC ministers say that while geopolitical issues and higher consumer demands are at fault for high oil prices, they also point out that China, India and other countries are vying for the refined oil being produced and that if nation's want to curb prices they need to develop refining capacity.

None of the OPEC ministers denied Chavez' comments about their enjoying the windfall of cash they're getting for their crude oil but they also wouldn't accept blame for the cause of higher energy prices on the global economies.

While oil ministers say refining capacity needs to be increased, no develop plans were seen being accelerated by OPEC member countries - except in their interest to invest in Venezuela - where Chavez has been developing lateral investment schemes in Bolivia's natural gas fields where he pledged $1.5 billion to President Morales.

Both Iran and Qatar have shown an interest to partner with Venezuela. Qatar's oil minister Al Attiyah emphasized openly at the Caracas OPEC meeting that his country is “very much interested” in investing in Venezuela and will hold talks with his Venezuelan colleague Rafael Ramírez, Minister of Energy and Petroleum and President of PDVSA.