Fear in the Air
Assured, confident, in control of the situation. These are the characteristics the OPEC ministers like to portray as we head into the 145th OPEC get-together.
However, as I wait for the ministerial arrivals at the Obere Donaustrasse HQ, I can't help thinking there is a little fear amongst the players.
Fear of making previous errors, perhaps fear of tipping the world economy into recession or maybe most important of all, fear of creating a damaging split amongst the oil producing nations. As I write, the press pack is weighing up chatter that arch-hawks such as Iran, Venezuela and Nigeria will publicly stand firm against a Saudi-led concession to the consuming nations. Saudi is rumored to be behind a 500,000-barrel-a-day increase in production.
But why fear? It's simple. A weak dollar is negating a large portion of the revenue gains from highly-priced crude. This in turn is damaging the ability to deliver domestically on key projects and equally importantly denting the ability to invest petrodollars around the globe. Hence, a continued high oil price is not just a luxury for many OPEC members. It's a necessity.
Also remember the historical perspective, because OPEC does. Back in 1997 the cartel sanctioned a 10% hike in production just as the Asian crisis was spreading around the globe. The result? Oil prices got slammed from just over $20 a barrel in 1997 to $10 by 1999.
So for the fear factor, just think 'once bitten twice shy!'