One Cup of Oil Please!!
By Sharia Walker
Tuesday, June 17, 2008
The main topic that seems to be catching headlines in every major daily newspaper around the world including New York Times, Washington Post, The Independent, Arab news, etc. is the staggering increase in oil prices and its collateral damages. Everyone is keeping a close eye on what the next jump in price will be.
Until recently, I have never realized how directly related the price of oil is to the price of food. The price of basic necessities like bread, rice and wheat has more then doubled in some countries, which has sparked instability in many regions. People from Europe to Asia have gone to the streets in protest of the high prices of fuel and food. Governments are concerned that this may lead to the acceleration, not only of economic, but also social and political unrest around the world.
This year alone the price of oil has soared by about 40 percent. In January 2007 the price of oil was $50 per barrel, and then in August consumers paid $75 per barrel. Currently prices have skyrocketed up to approximately $135 per barrel since May 2008. Long-term price forecasted by Wall Street banks estimate the spike in oil prices to about $150 and $200.
Everyone is looking to point the finger of accusation for the crises. The most obvious suspect to blame would be Saudi Arabia. After all it is the swing producer in OPEC and the member with the most reserve capacity.
President Bush is doing the world a favor and pressuring the Saudis to increase oil production. Apparently, some analysts relate the problem to fundamentally an issue of supply and demand.
However, President Bush and his staff seem to have overlooked some much more complex factors before visiting the Saudis. Other such factors could be Western speculations as well as the weakened U.S dollar. CFTC experts confirm that market forces are chiefly responsible for the increase in oil prices which we are witnessing.
Furthermore, factors such as, political unrest in the Middle East as well as growing demands in prospering economies like India and China, could be blamed for the swelling of oil prices.
But what seems most puzzling was reports by Wall Street Journal explaining that traders of crude oil complain that their market is in distress due to too much of an oil supply, rather than too little.
In response to the pressures the Kingdom of Saudi Arabia this month has increased oil production by 300,000 bpd. Furthermore, just yesterday King Abdullah has indicated his commitment to the UN Secretary General, Ban Ki-moon, to pump an extra 200,000 bpd next month to place a brake on the increase of price.
I will not pretend to be an expert in economics but common sense tells me that if it were a matter of supply and demand such an increase in oil production would have lead to the reduction in prices. But as one reporter from Arab News stated, “these are neither normal circumstances nor normal times. Market forces are not working as usual.”
Chandren Nair, from the Global Institute for Tomorrow, informed Al-Jazeera that “increasing oil supply was not a solution to the current problems. Increasing supply is a knee-jerk reaction you’d expect from politicians.”
This should be a wake up call for both producers as well as consumers of oil. The Kingdom’s kind gesture, in producing more oil, is not enough. This is a global problem, which is in-need of a global solution. And why should the public, especially in developing nations, have to pay such a high price for an unjustifiable phenomenon?
In just a few days, 22nd of June, Saudi will be acting multilaterally as it hosts a meeting in Jeddah for both oil producers and consumers. They are hoping to reach long-term solutions to stabilizing the price of oil.
It would be in the spirit of optimism to say that Saudi should seize this opportunity to act as a lead state in addressing this problem. It should delegate tasks, to attending personals, and pressure governments to finding ways to stabilize the price of fuel and food for their people by subsidizing these resources. It would also be in the spirit of optimism to have faith in that the topics in this meeting will be about how to produce cleaner energy, including solar power and hydropower, as long-term solutions.
Unfortunately, I believe that this meeting will be one of securing interests for all states attending. As a pessimism I believe that everyone is attending to safeguard what is theirs and get more if possible. My faith is not in this meeting or any other meetings of elite politicians and diplomats, who are most probably directly or indirectly partially responsible for the crises. But rather, my confidence is in the mass public. As people continue to demonstrate, and go on strike they will be the ones who will eventually either bring the prices down by force or pay the price for the one-cup of valuable oil.