OPEC's President: "No Shortage of Oil"
APRIL 1, 2003 Business Week WAR IN IRAQ
If anything, says Abdullah bin Hamad Al Attiyah, the producing nations' biggest fear is a post-war price collapse
In the run-up to the war in Iraq, crude oil prices shot to levels not seen since the last Persian Gulf crisis. Since the war began, however, prices have dropped back to earth. Crude oil at the New York Mercantile Exchange is hovering close to $30 a barrel, a far cry from the nearly $40-a-barrel levels seen a few weeks ago. Indeed, according to Geneva-based energy consultancy Petrologistics, the cartel boosted production by 1.3 million barrels a day in March.
Still, with the war's course so uncertain, oil prices are likely to see volatile times in the days and weeks to come. What lies ahead? On Mar. 27, Abdullah bin Hamad Al Attiyah, the president of OPEC and Qatar's Energy Minister, spoke to BusinessWeek's Laura Cohn in Doha, Qatar, about the adequacy of energy supplies, the mood at OPEC, and what will happen to oil prices after the war. Following are edited excerpts of their conversation:
Q: What are you doing to ensure that there will be adequate energy supplies?
A: More oil has been produced and brought to the market. That's why the price has dropped dramatically. If you ask yourself, why has the price dropped very dramatically -- almost more than $7 in 10 days? There's more oil in the market, and the world can absorb it. Also, don't forget Venezuela is coming back [into the market as a producer].
If you go back to December [with strikes and unrest in Venezuela], we saw 3 million barrels suddenly disappear...[but it's] coming back. Now, people are concerned about Nigeria, but this is only temporary.
Q: Iraq has asked other Arab nations not to increase their production. What's your reaction to that?
A: They had the right to ask. Iraq is a member of OPEC, and anyone as a member of OPEC has the right to discuss [anything] with other members. But OPEC and major oil producers are working together to stabilize the oil markets.
We are not aiming to produce just to produce. We aim to stabilize the oil market. We aim to seek a balance between demand and supply. OPEC is an international organization. It is not a political organization.
Q: How often are you in consultation with your OPEC colleagues?
A: Not daily, but we are in consultation all the time. I do a lot of consultation with my OPEC colleagues, with non-OPEC colleagues. We try to see how to manage it. In reality, oil prices are always underestimated.
From 1985-2000, the average price of a barrel of oil was only $18. Sometimes it's exaggerated. When oil prices go to $30, consumers start crying. But when you take the average of the last 15 years, [you see] you shouldn't blame oil producers.
Q: Do you have any plans for an emergency OPEC meeting?
A: Why should we meet? There is no shortage of oil. The price has dropped. So it's not [like] we have an agenda that would attract us to meet. If we have something to push us, yes. If there's a big shortage of oil, prices skyrocket, then we [will] have something to say.
My main concern is that after the war, we will see the oil price collapse. Demand and economic growth now are not good. The world is in recession, and this is reflected in consumption. This is a story we have to be very careful about.
Q: If the war drags on, won't oil prices rise again?
A: I cannot predict what will happen. Some analysts said once the war starts, oil will reach $100. Do not believe analysts. When I went to America for school in 1970, there was a very famous song [by The Undisputed Truth] that said "Smiling faces sometimes they don't tell the truth." Analysts never give the truth. All scenarios are open. This is my concern.
Q: In your view, why did the price of oil go up so much before the war started?
A: It was because of the speculators. They hijacked the oil market. We always said there's a high war premium. It was more than $7. Now the market has become more pragmatic.