The Organisation of Petroleum Exporting Countries (OPEC) has again shunned repeated appeals by the United States of America (USA), world�s biggest oil consumer, to increase output, insisting that the record high prices is driven by a weak dollar, speculation and political strife.
By this resolution, OPEC will hold its current production target of 29.67 million barrels per day.
At the 148th meeting of OPEC yesterday in Vienna, Austria, ministers of the organisation maintained that the market was well supplied, and argued that the rising oil prices was due to factors that were beyond their control and not because the market was under supplied.
Algerian Oil Minister, Chakib Khelil, said the global market was being affected by �the mismanagement of the United States economy, asserting that America�s problems were a key factor in the group�s decision to hold off on any action.
In an apparent reaction to OPEC�s decision to leave output unchanged, President George W. Bush said yesterday that the group was wrecking havoc on its biggest customer and the world�s largest economy, the United States (US).
The US had argued that a slight increase in supply from OPEC would help tame prices and limit any impact on a fragile world economy.
But notwithstanding the calls to boost output, the 13-member organisation said it would maintain current production levels because crude supplies are plentiful and demand is expected to weaken in the second quarter.
The group, after reviewing the prospects for the oil market, observed that the market was well-supplied, with current commercial oil stocks standing above their five-year average.
The Conference further noted that the current price environment did not reflect market fundamentals, as crude oil prices were being strongly influenced by the weakness in the US dollar, rising inflation and significant flow of funds into the commodities market.
A communiqu� issued at the end of the meeting stated: �In reviewing the prospects for the oil market, the Conference highlighted the economic slowdown in the USA , which, together with the deepening credit crisis in financial markets, is increasing the downside risks for world economic growth and, consequently, demand for crude oil.
�The Conference observed that the market is well-supplied, with current commercial oil stocks standing above their five-year average. The Conference further noted, with concern, that the current price environment does not reflect market fundamentals, as crude oil prices are being strongly influenced by the weakness in the US dollar, rising inflation and significant flow of funds into the commodities market.�
Worried by the escalating oil prices, President Bush, at a meeting yesterday with King Abdullah of Jordan at the White House expressed concern over the slowing US economy, asserting that �it�s a mistake� for the OPEC to resist increase in production in the face of world turmoil.
�’I think it’s a mistake to have your biggest customer economy slow down, or your biggest customers’ economy slowing down, as a result of high energy prices. My advice to OPEC is to understand the consequences of high energy prices. If I were OPEC, I would be concerned,� Bush said.
Bush who though did not lay all the blames of America�s economic woes on OPEC acknowledged that the housing market crisis has hit hard on the economy. Critics however say the US President is shifting blames where it does not belong following his party�s failed policies in the last eight years.
Observers also suggest that the next president should focus on ridding America of dependence on foreign oil.
Meanwhile, the US Department of Agriculture (USDA) has announced that it will invest up to $18.4 million over three years, for 21 biomass research and development in an effort to reduce the country’s dependence on �oil from unstable parts of the world and mitigate climate change.�
Making the disclosure at an international conference in Washington DC on renewable sources of energy and energy security, organised by the American Council on Renewable Energy (ACORE), Secretary of USDA, Ed Schafer and Department of Energy (DOE) Secretary, Samuel Bodman, told reporters that this will put America on a path of reducing its dependence on foreign oil.
The grant, they said, would fund ongoing innovative research to develop technologies and systems that lead to the production of bio-based products and biofuels.
The US government, they further explained, hopes that funding such technology would help make biofuels competitive with fossil fuels in the commercial market.
The US government hopes the conference will garner �broad, high-level international support for developing and deploying clean, renewable energy technologies as a key mechanism for increasing energy security, mitigating climate change, improving air quality and promoting sustainable development.�
It is not certain how new technologies will affect the income of countries such as Nigeria which depend heavily on oil revenue. Participants of the conference from some 137 countries are however determined to break the oil curse.
Oil shot up a dramatic 19 per cent last month as the falling dollar prompted speculators and other investors to shift cash to crude and other commodities as a hedge.
The prices surged past $104 a barrel for the first time after the OPEC announcement yesterday, coupled with the release of a government report showing a surprise drop in crude oil stockpiles.
But justifying OPEC�s decision, Khelil noted that the group last decided to raise its production in September 2007 and argued that that decision did not halt the oil-price rally. He however stated that crude stock levels could build during the second quarter when consumption typically tapers off and any seasonal decline could be exaggerated by the impact of economic slowdown.
Mar62008