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I'm not defending OPEC but...

The "West" is quick to point the finger at OPEC whenever oil prices are on the rise, but when nations outside the organisation produce 60 per cent of the world's supply there are other countries who need to take some responsibility.
Last modified: 24 Jun 2011 00:19

The "West" is quick to point the finger at OPEC whenever oil prices are on the rise. All manner of statistics are produced to blame OPEC nations for their economic troubles.

Take for example that the cartel's members would earn $1 trillion dollars this year as crude trades above $100 a barrel. It may be so.

But let’s not forget that almost $600bn leaves these oil producing nations in remittances (western immigrants benefit as well), company profits (Western oil companies, included) and through the import of consumer goods. In effect, these nations are keeping the global economy ticking.

Let’s be clear, OPEC nations produce 40 per cent of the world’s oil. That means there are nations that produce the other 60 per cent.

Maybe the United States, Canada and UK should really find time to criticise their independent oil companies for not producing enough oil to meet their demands or reinvest in new oil finds, renewable energy.

Always easy to criticise foreigners.

And the politicians have reason to blame OPEC, it enables them to deflect criticism of their own tax policies.

It’s an absurd situation when almost 60 per cent of the gas price at the pump is taken by governments in tax.

The timing of the release close to the 2012 US presidental election can not be dismissed. The Republicans are right in thier criticism.

Inflation is a concern in many developing, growth nations right now. Let’s be clear, artificial subsidies on oil and currency manipulation are a bigger factor.

And the absurdity does not end there, for decades there have been calls to find alternative, renewable sources of oil.

What we have in the West is a total lack of leadership, either because the big oil producers are big contributors to election campaigns or the short-sighted nature of politics.

No one wants to put their head above the parapet and make the tough unpopular decisions.

It's the West that is the cause of green house gasses and failure in leadership in cutting harmful emissions.

The likes of India have every right to say: you’ve enjoyed your economic prosperity and now its our turn and we’ll climb the league table of growth how we like.

The International Energy Agency's (IEA) decision to act like a central bank and release oil is a dangerous precedent.

They can mask it by saying we’re doing this because of Libyan disruption.

But Saudi Arabia made it clear that despite OPEC’s objection it would fill any voids and has done so. And let’s not forget that the world is adequately supplied.

And it wasn’t the 2008 oil price shock that caused the global financial crisis or recession for that matter.

Here’s a few words from the IEA itself:

The market is currently aware that emergency stocks can and will be used during any severe supply disruption. This in itself helps to limit the price exuberance that can result in large spikes when there are physical disruptions. But, a policy of releasing oil to counteract high prices would add  an additional source for speculation.

We are often asked: if emergency stocks can be used for domestic supply disruptions, why not use stocks to bring prices down when they spike? We think that to use the reserves for price management is dangerous territory and would  fail.

This is not a defence of OPEC's position, but just like the European Union it does a poor job of promoting itself.

The Wall Street Journal says that OPEC could release more oil if there is a glut. It also points out that Saudi Arabia needs an oil price of $95 a barrel to pay for the $129bn its spending on economic reforms.

Despite the IEA and Washington's best efforts, there is only one way oil prices are going: UP. Get used to it.