Editor's Note:
We recently talked with the President of OPEC while at the
US-Arab Economic Forum in
Washington. To make sure we had his correct details we did a Web search for "OPEC President" and the top result was a BBC news report,
"OPEC President: 'There is no more
supply'." It quoted Purnomo Yusgiantoro, the organization's president on August 2, 2004. He said there were not enough supplies to move into the market which, that day, saw prices climb into record
territory. The price of $44.24 a barrel on the New York Mercantile Exchange was what Mr. Yusgiantoro said was a "crazy" level in the market. The archived article included a link to a current
report from Reuters that the U.S. House of Representatives this week voted 324-84 permitting the Justice Department to sue OPEC for "limiting oil supplies and working together to set crude prices."
It is against this backdrop of runaway energy costs, with today's cost per barrel over three times the "crazy" level it was less than four years ago, and politicians scrambling to react, that
President George Bush recently visited Saudi
Arabia. Almost all of the headlines following his meetings in the Kingdom, no matter what other important matters were discussed, talked about how he had come away without much progress on the oil production front. Saudi Arabia reportedly increased output 300,000
barrels a day, a week before the visit in response to customer demand but that was said to not be enough to offer relief from the spiraling costs in the market.
Shortly before President Bush's trip to the Kingdom SUSRIS talked briefly with Dr. Chakib Khelil, OPEC President and Algerian Minister of Energy and Mines, on the subject of oil supply and demand and Saudi Arabia's role in world energy production.
SUSRIS
EXCLUSIVE
Dr. Chakib Khelil, OPEC President
Washington, DC
May 8, 2008
SUSRIS: Next week President Bush is going to Saudi Arabia. He has on his "to do" list "Have a conversation about taking positive steps to reduce the price of oil in the marketplace." What practical measures could be taken to throttle back the market price?
Dr. Khelil: I think the supply and demand are in equilibrium. Of course, Saudi Arabia can decide to sell their oil cheaper, that�s their sovereign right. But it�s not the market price. Anybody has the right to sell it cheaper if that�s what they want to do. It means a loss for the treasury of those countries. But increasing production is not going to reduce the price. I�ve said that many times. Because it�s not driven by supply and demand - the oil price. It doesn�t have anything to do with supply and demand. So reducing demand is going to do it, but reducing demand is not in the cards. It�s a function of time. It�s a function of growth in the consuming countries. So if Saudi Arabia increases supply it�s not going to change the prices in the markets at all.
SUSRIS: Will increased supply have an impact on market speculation due to other reasons, such as geopolitical events?
Dr. Khelil: I don�t think so. Because geopolitical events are still there. Is that going to change the tension in Iraq? Is that going to change the tensions in the Middle East. Is that going to change the problems in Nigeria? It�s not. Is that going to change the valuation of the dollar with respect to the Euro? It�s not. So then, if it�s not, increasing supply is not going to have any effect. Psychologically it might have, maybe a small bump and then it�s going to pick up again.
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