Riyadh – Everyone has the conviction now that we should look forward for fair prices of our oil production, and thus we should maintain a reasonable price that will provide adequate revenue.
Former Secretary-General of OPEC Adnan Shihab-Uddin revealed that member states of the organization have learned the lesson after they failed to predict the market’s needs.
Shihab-Uddin told Asharq Al-Awsat newspaper in an interview that it is very important to have an understanding with Iraq and Iran about shares and production levels.
When asked about his views on the changes in energy, Shihab-Uddin said that the world is changing; Middle East is no longer the only supplier of oil and sources are varying with fossil fuels and its various kinds.
Oil prices had recently reduced which mainly affected Gulf States, Shihab-Uddin told Asharq Al-Awsat that the financial crisis began in 2007 and continued until 2009. He added that OPEC played a major role in helping the world economy regain its state.
He believed that in 2009 and 2010, OPEC might have been slow in responding to the market’s demands. In 2009, Custodian of the Two Holy Mosques Abdullah said that the fair price per barrel is $70.
Shihab-Uddin did confirm that for OPEC to maintain the price of $70 pb, it had to store reserves which requires investments.
According to the former sec-gen, it is possible that OPEC wasn’t able to predict the market’s behavior and needs and thus couldn’t maintain a steady price, which caused a spike of $120 per barrel.
In 2014, the organization was faced by the reality and had to deal with what is there and thus had to review the policies. Shihab-Uddin added that the matter now is how to deal with the current situation with competition on low-cost oil in return of high cost.
Shihab-Uddin believes that the decision in 2014 might have been a little late, given that the prices shouldn’t have reached $140-150 per barrel, but it is “better late than sorry”.
He explained that some OPEC states are reconsidering their policies, but we will have to wait until everyone has learned their lesson. He added that he is now convinced that countries are looking for fair prices that provide reasonable revenues.
As for the OPEC decision taken in Algiers, Shihab-Uddin said it was about time the price was stabilized at $50, but everyone should be careful on how to maintain that.
In response to whether Russia also learned a lesson just like OPEC, Shihab-Uddin said that it is with no doubt that Moscow is realizing the same thing. So, when Russian President Vladimir Putin announces the willingness of his country to cooperate with OPEC, and when Russian Energy Minister attends OPEC meetings, this means that they are motivated to work together.
According to the Shihab-Uddin, the problem is not exactly with Russia, but within OPEC itself. He believed that agreement should be reached with Iraq and Iran. He stated that Saudi Arabia said it was willing to reduce oil production by 4% given that the other parties commit to reasonable production levels.
Concerning the OPEC upcoming meeting in November 30, Shihab-Uddin said it is hard to predict how the meeting will go, but it can predicted towards which direction it might head.
He added that he can’t be sure if the meeting will be successful or whether the prices will increase a little bit. He believes that an agreement will be reached, if not on November 30, then a little while after that.
When asked whether this time will be different with the Russians, Shihab-Uddin said the Russians will attempt to gain as much as possible, but at the same time will try to be cautious as not to be the reason for prices failure.
As for the role of OPEC, Shihab-Uddin said if it hadn’t been for OPEC, another organization would have been formed for the same purpose. He added that the organization played important roles in the past, but now everyone is seeking their own interest.
Former sec-gen believes that we are witnessing a new stage where OPEC will have an important role in determining oil prices and taking decisions which will have the best interest of both the consumer and producer.
When asked about the role of Saudi Arabia in OPEC, Shihab-Uddin said that the kingdom always led OPEC because cheapest oil is produced in the Gulf. He added that Saudi Arabia decides where OPEC should head, and if OPEC makes right decisions it is because of the Saudi leadership.