Steve Sedgwick at the OPEC Meeting

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.

OPEC Meets as Oil Rises

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!'