OPEC And Producer States’ Policies

… The opening ceremony of the Third OPEC Summit was marked by two important speeches, clearly expressing two different schools and methods in the region. However, despite the fundamental differences between OPEC member states (the Saudi and Venezuelan oil ministers played a key role in establishing OPEC in 1960), the organization was able to overcome them and achieve the goals articulated in its by-laws.

The first speech at the Third OPEC Summit was by Venezuelan President Hugo Chavez; he spoke as a former chairman of OPEC and after delivering his addres, handed over his duties to King Abdullah, who gave a speech that reflected the points of view in the Kingdom of Saudi Arabia regarding OPEC policies and orientations.
The difference between the two speeches was huge and highlights the visions of these two important oil states with regard to the orientations and tasks of OPEC. Of course, they two countries enjoy different weights as members of the oil club; the Kingdom’s production level stands at about 11.5 million barrels a day (or more than one-third of OPEC’s actual production) and includes a reserve production capacity of about 2.5 million barrels a day; Venezuela’s daily production stands at 2.6 million barrels and it has no reserve production capacity. This reveals the difference in their roles in have an impact on the organization’s policies, and the extent of their importance on the world oil scene.

Chaves outlined the first declaration of principles from the First OPEC Summit in Algeria in 1975 and took considerable time explaining it, although decades have passed since it was issued and the international oil markets and industry have changed. He also spoke about the political and international conditions experienced by OPEC in the 1980s and 1990s, and how it was able to overcome the 1986 price collapse. During his outline of the organization’s history, Chavez referred to the Second OPEC Summit in Caracas in 2000, and how when he took over the presidency of the summit oil prices were around $10 a barrel. Chavez hands over the post today with prices approaching $100 a barrel. Of course, no one mentions the basic market factors that have pushed prices to this record level, or the repercussions.

The Venezuelan president proposed forming a joint bank for OPEC states, which is a part of his attempts to set up a bank for countries of the Third World, separate from the World Bank. Chavez mentioned talks that he had recently had with Brazilian President Lula da Silva and the possibility of Brazil’s joining OPEC, which, if this country accepts and if OPEC approves, would constitute a big development for the organization.

Dar Al Hayat