Against the clock

Some say that time is running out for OPEC. But OPEC is setting a course for a new era as it prepares for its Friday meeting in Cairo, reports Gamal Nkrumah
The 119th extraordinary meeting of the Organisation of Petroleum Exporting Countries (OPEC) is scheduled to convene in Cairo Friday 28 December amid much speculation about the future of the organisation that had its heyday in the late 1970s and early 1980s. With a global recession and the attendant slump in demand for oil, the immediate prospects for OPEC look bleak.
The economic slowdown in the United States -- by far the world's largest energy consumer -- has emerged as OPEC's most pressing concern. However, perennial problems remain. OPEC's major headache in the past few years has been non-OPEC oil exporters' actions that undermined the organisation's goal of stabilising markets and restoring crude oil prices to what the organisation defines as "fair and equitable" levels. OPEC's concern is that even though non-OPEC member states account for 23 per cent of proven oil reserves, they produce 60 per cent of total global output.
Topping the agenda will be securing cooperation from non-OPEC exporters to preserve market stability. OPEC ministers are also scheduled to discuss the organisation's decision to reduce oil production. At the organisation's 118th extraordinary meeting last month, member states agreed to reduce their oil production by 1.5 million barrels per day (mb/d) starting 1 January 2002. At the 14 November meeting in Vienna, where OPEC has its headquarters, the organisation not only tried to rein its members, but also to convince non-OPEC countries to restrain the temptation to sell more oil and undercut the organisation's prices.
Participating oil and energy ministers from OPEC member states in Cairo are expected to survey economic prospects for member states, especially those suffering most from the global economic slump. OPEC is an organisation of developing countries, some of whom have relatively high per capita incomes, but none of its 11 member states has a very impressive rank on human development indexes.
All OPEC member states have seen a marked reduction in their per capita income in recent years and they have had to cope with fast-shrinking oil revenues. Even relatively wealthy OPEC members with small populations -- ones who are better equipped to weather the global economic storm -- are facing the repercussions. However, the socio- economic situation in OPEC member states with large populations is deplorable. Once wealthy OPEC members like Venezuela and Iran are reeling from compounded economic woes. Even worse, countries like Nigeria, Indonesia and Algeria are teetering on the verge of economic collapse and seething with social tensions and political instability.
Nevertheless, OPEC's Secretary-General Ali Roderiguez-Araque, former Venezuelan minister of oil and energy, is putting on a brave face and insists that the organisation he leads is not a spent force. "OPEC member countries, as owners and producers of one of the most important commodities in the modern world, are actors in the present process of achieving a new balance of [global economic] power," noted Roderiguez-Araque recently. After all, oil accounts for 40 per cent of the global market share of all energy sources.
Moreover, Roderiguez-Araque argues that OPEC cannot be overshadowed by non-OPEC exporters. With 77 per cent of the world's proven oil reserves and an estimated future demand that will peak at 106 mb/d in the next 20 years, OPEC is projected to increase its market share by 51 per cent during that period.
Unlike OPEC member states, some of the major non-OPEC oil producers and exporters like Britain and Norway are wealthy, advanced and highly industrialised countries. Others, like Russia and China are major consumers of energy themselves. China's energy needs are growing faster than any other country. Asia as a whole is projected to surpass Europe and North America as the world's leading consumer region.
Still, even Roderiguez-Araque concedes that closer cooperation among oil exporters is absolutely necessary. "If we were to continue to carry the burden of market stability unilaterally, others would doubly benefit from our organisation's sacrifices, namely through relatively high prices and a production increase," Roderiguez-Araque said.
OPEC rightly reasons that oil exporters must coordinate policies to minimise price volatility and ensure market stability. Failing this, "the final result, however, would be the effective neutralisation of OPEC's efforts, thus obstructing stability and placing the organisation's members in an untenable and unsustainable position, whereby they lose both market share and revenue," he warned.
However, OPEC is careful not to antagonise non-OPEC exporters. Indeed, OPEC has consistently made overtures to win over non-OPEC members, and its conciliatory approach has borne fruit. In 1999, non-OPEC producers cooperated closely with OPEC and obtained many mutual benefits from such cooperation.
Norway announced on 18 December that it will cut oil production by 150,000 mb/d between 1 January and 30 June 2002. OPEC also recently welcomed positive responses from non-OPEC members Mexico and Oman. The next ordinary meeting of OPEC is scheduled to take place in the Austrian capital in March.
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