OPEC Did Not Give
Market Control Over to US
appointment as acting minister of petroleum by President Mahmoud Ahmadinejad,
Mohammad Aliabadi was assigned to one of the most important oil-related
missions. It was very important for Iran to be present in the 159th
OPEC meeting because after 36 years, the country had been chosen chairman of
the organization. Therefore, a powerful presence was of utmost importance.
The current levels of supply and demand in the global oil market will
prove that there is no shortage in the market.
other hand, explicit calls form industrial countries led by the United States
on oil producing countries to increase output and reduce prices, had made the
159th meeting of the OPEC of great significance. Management of
those conditions needed meticulous planning. The United States was looking to
OPEC to solve its economic problems by approving a hike of 1.5 million barrels
per day in the output and reducing global oil prices. On the opposite, the
organization was bent on protecting national interests of its members.
Therefore, being a graduate of civil engineering, Aliabadi left Iran for
Vienna (OPEC headquarters) one day before the meeting (June 8). Mohammad
Aliabadi, acting minister of petroleum then took part in the following
exclusive interview with Persian daily Iran to talk about the details of the
159th meeting of the OPEC.
the most important topics discussed in the meeting?
whole, the negotiations aimed to bolster common position of member countries
and maintain the organizationís output ceiling in order to stabilize the
market and prevent global oil fluctuations.
their positions during the negotiations?
heard Iranís arguments in favor of maintaining output level and compared them
to their own national interests, they were rapidly convinced. On the whole,
after negotiations with a high number of OPEC members, we came to realize that
viewpoints of most of them conformed to that of Iran and this was why all
member countries, save for three countries which had already voiced their
stances, took a single position and opposed any output hike.
What is your
opinion about general atmosphere governing the 159th
the meeting started on June 8, member countries pursued various approaches.
One approach was influenced by a call from big industrial countries which
requested increase in production. Only three countries supported that approach
which was a result of the
disagreement with the existing prices. The group supporting output hike
maintained that international market demanded 1.5 million barrels per day more
oil until the end of the Christian year and urged that OPEC should pass the
output rise in its 159th meerting. On the opposite, there was
another approach which maintained that oil market is balanced and no shortage
has been observed. This group provided logical arguments in favor of
maintaining the existing output level. They also announced that OPEC was ready
to meet in an extraordinary session and pump more oil into global markets if
it felt that higher demand actually existed. They firmly believed that
national interests of the members should be given priority over the market.
They maintained that the interests of producing and consuming countries should
be taken into account at the same time.
of OPEC, what reasons are there to maintain production ceiling of the
current levels of supply and demand in the global oil market will prove that
there is no shortage in the market. Even strategic reserves of major consuming
countries is above the average figure for the past five years. On the other
hand, there is 64 million barrels of floating oil with no customer.
reason for maintaining current production level is higher production of crude
oil by Iraq (which is out of OPEC rationing system) which will happen in the
coming months while Libyan oil output may rise again. Therefore, there are
many logical reasons to maintain the current level of production. Apart from
those reasons, I, as chairman of OPEC, announced that we are meticulously
controlling consumption and prices and if we reached the conclusion that the
market needs more oil, we would invite OPEC members to an extraordinary
session to raise output. Under present circumstances, however, increasing oil
production will be totally detrimental to producing countries.
States had apparently conducted a lot of consultation before the 159th
meeting to raise the output!
correct. About three weeks before the meeting, the US President summoned a
group of oil market managers and policymakers and clearly asked them to reduce
prices. In addition, the United States contacted some OPEC members to
guarantee its goal.
When price of all goods and services have risen several times in the
past decade, oil, as a strategic commodity, should also see a rise in
media also quoted Obama as saying in an address that the American people
should spend less on fuel. However, they want to do that by making producing
countries suffer and this is by no means fair. On the other hand, unfavorable
economic conditions of the United States in recent years have put a lot of
pressure on the US administration which aims to boost trade by reducing costs.
Meanwhile, a major reason for runaway increase in oil prices in recent years
has been circulation of weak dollars. Therefore, the United States is a cause
of the situation which it seeks to change.
Do you think
that the international market is ready to take in more oil?
answering that question, let me quote from statistics. According to official
figures produced by secretariat of OPEC in January and February, unilateral
output rise by OPEC and Kuwait to make up for disruption in Libyan oil
production had increased the organizationís output to about 30 million barrels
per day. After only two months, that is, March and April, they had to reduce
that figure by one million barrels per day and go back to the former
production. The reason why they had to cut back output was absence of adequate
demand in the market. When flow of the Libyan oil was cut due to political
problems, some member states decided to fill in the void. However, the Libyan
oil is light oil while that of Saudi Arabia, Kuwait and the United Arab
Emirates, which advocated output rise, is sour and heavy oil and the market
does not need more sour oil. The reason is quite clear. Refineries that treat
light and sweet oil need heavy investment and time to adapt their processes to
heavy oil feed and this is not economical for refinery managers. In addition,
as the situation in Libya calms down, the country may resume production in the
near future. As a result, more oil will not be consumed by the market.
Consuming countries cannot buy and store it because reserves are totally full.
level should global oil prices stand now?
that oil price should increase in parallel to other goods and services. When
price of all goods and services have risen several times in the past decade,
oil, as a strategic commodity, should also see a rise in price. Another
important point is stabilization of oil price and prevention of illogical
fluctuations. When prices are constant, both consuming and producing countries
will be able to make accurate and long-term plans. The next point is necessity
of protecting supply security. Since most operating oil fields are past their
half-life, further production needs more investment. Therefore, if oil prices
do not allow for that investment, security of supply will be in danger.
Since the Supreme Leader visited South Pars region at the beginning of the
current Iranian calendar year (started March 21, 2011) and called this year a
year for economic jihad, special attention should be paid to shared fields,
especially South Pars gas field. Therefore, making the most of such oil and
gas fields should top priority list of the Ministry of Petroleum in order to
prevent waste of this natural wealth.