Oil has been the recurring theme in our Resource Headframe over the past few weeks and why not? Oil is threatening to crack the US$100 per barrel mark, with prices currently hovering around US$98 a barrel.
And the ramifications of this are growing. OPEC countries believe they have lost control of oil prices, risking a consumer switch to other sources of energy.
Bloomberg reports that exporters have benefited from this year's price rally, including a 20% increase since the group's last decision in September to boost output.
OPEC oil ministers, including Venezuela's Rafael Ramirez, say there's no reason to raise supply further at a Dec. 5 OPEC meeting, because inventories are adequate.
"OPEC can't do anything about the price," Ramirez said earlier this week in Riyadh, Saudi Arabia, where OPEC is holding a heads of state summit this weekend. Oil prices could reach US$100 a barrel "soon" and OPEC can do "very little" about it, he said.
Crude oil in New York rose to a record US$98.62 a barrel last week because of concern supplies may fall short during the Northern Hemisphere winter.
Prices have also risen on concern supply disruptions in producers such as Iran and Nigeria, and as investors turned to commodities as a haven from other financial markets and a falling US dollar.
"OPEC is finding itself a victim to movements on equity markets," Daniel Yergin, chairman of Cambridge Energy Research Associates, said in Riyadh. "It is perplexing to have the oil price change several dollars a day, when one is thinking about 15-20 year investments."
Algerian Oil Minister Chakib Khelil, who will be OPEC's president next year, told Bloomberg reporters in Riyadh that he expects prices to stay near current levels, over US$90 a barrel, through the winter season until at least the end of the first quarter.
Motorists and other consumers in some industrialized nations are already feeling the pinch of higher prices, according to the Paris-based International Energy Agency, which last week cut its forecasts for fourth-quarter world consumption for a third time since August.
"High prices so far have limited impact on demand; however we can't remain complacent. This high price is potentially dangerous," OPEC President Mohamed al-Hamli said. He cited the example of the 1970s "when the electricity industry switched away from oil."
At the summit, OPEC plans to reject US calls to increase production, according to a draft of the organization's statement to be released, three OPEC officials told Bloomberg on the condition of anonymity.
The group will instead reiterate its commitment to stable supply and invest in technology to cut carbon dioxide emissions from oil and gas in a bid to remain a primary energy provider in a world more aware of climate change.
OPEC was burnt by volatile prices a decade ago. Oil fell to US$10 a barrel at the end of 1998, forcing OPEC to quit squabbling and cooperate on supply cuts. Prices had recovered to US$30 by the time Venezuelan President Hugo Chavez hosted OPEC's second heads of state summit in September 2000 in Caracas.
"OPEC has become much stronger since then because it re- established the quota system and discipline," Ramirez said.
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