As oil prices continued to climb unprecedented highs, consumers and economies across the United States, Europe and much of the world have been negatively affected. Moreover, many countries have experienced social unrest and economic turmoil as a result of the food crisis augmented by soaring oil prices.
Therefore, oil exporters and importers decided to meet to put a brake on its increasingly soaring value. Saudi Arabia, the world’s biggest producer, hosted an oil summit in Jeddah in June as an attempt to find solutions for what seemed to be an increasingly complicated conundrum; oil producers increase their daily output, while prices continue to soar. The kingdom also called for Jeddah’s unusual meeting between oil producing and consuming nations as an attempt to show that it was not deaf to international cries that high oil prices have caused social and economic turmoil.
During the summit, oil producers harshly criticized speculators, arguing that they are to blame for the steady increase in prices, which led its value to double in the past year. Although government ministers and traders were anxiously waiting to see the effects of the summit on prices, it seemed that they were chasing a mirage. The summit, many an analyst argue, failed to bring the precious commodity prices down to reasonable levels, as it continued to hit new highs, having scored $144 a barrel in the first half of July.
Leaders and ministers from the 36 nations agreed that “the transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interactions in the crude market,” according to the summit’s communiqué.
Perhaps the only positive outcome of the summit was the announcement made by Saudi Arabia’s King Abdullah that it would increase daily production by more than 200,000 barrels to 9.7 million, and that it could increase its output in the future if necessary. The Saudi King also blamed speculation and taxes for high oil price and suggested to set up a program of one billion dollars similar to those of the Organization of Petroleum Exporting Countries (OPEC) set up before to solve the oil crisis.
In fact, consumer nations and producers disagreed on the best way out of the current dilemma. Consumers sought increased output and producers called for greater investment in refining capacity to meet increasing demand. “There is still quite a gap between consumers and producers as to what they see as the primary factors driving prices up and also what they see as the main priorities and measures that need to be taken to reduce prices,” one analyst opined. Producers slammed the role of speculators in driving up prices in recent months, calling for improved transparency in oil market deals.
While some analysts saw the Saudi decision to increase its daily oil output will definitely have a stabilizing impact on the market, others are still skeptic. Detractors of the “meager” outcome of the summit see that it probably will not lead to a large reduction in prices. Their argument proved right, with oil prices ranging around $140.
There was a lot of determination expressed for international cooperation and there was a lot of intent expressed by producers and consumers, many a keen observer would say. However, there were no real concrete solutions apart from Saudi Arabia lifting production.
Observers agreed that the Saudi move was a result of intense pressure, particularly from the US and the UK, to alleviate the pressure in oil markets. While Saudi Arabia had tried to show that it was not responsible for rising prices, a number of OPEC members were unhappy with the Saudi decision, since it was taken without consultation with the group members. The move, others would argue, could further complicate the world’s biggest oil exporter’s management of OPEC in the future.Download