Saturday, 24 July 2010


Apologies for the lack of entries. It is tremendously busy at the moment. Much of which I am not able to write about.

What I can talk about though is that I recently had the opportunity to visit OPEC in Vienna. A very interesting event, and there were 3 key messages that they put out.
First, they are not a Cartel
Second, $70 a barrel is a reasonable price for oil, and
Third, better that countries set the price of oil than the British Army

Interesting key messages. Their argument on Cartels is that this is an association of willing participants. There are oil producers not involved (such as the USA which does not export), who are free to set their own prices. Any OPEC member is also free to disregard anything agreed and go their own way with no consequence. They do not set prices as such.

The price for oil is not going down to $25 again in the near future, and if they have their way not at all. The world recession was caused by banks, not the price of oil so they feel confident that they can leave it at $70. The price anyway is set by traders and speculators, who were the ones who drove it up to $150 - not OPEC. This relatively high price will allow them to invest in extraction capacity for the next 20 years.

Finally, as the USA seems to line up to attack BP over the Gulf of Mexico oil disaster and the Lockerbie bomber and Libya, it is worth remembering why the comments about the British Army were so forcefully made. BP of course used to be Anglo-Iranian oil, and was implicated in the establishment of the Shah of Iran and the overthrow of a democratic government. The UK has in the past 100 years had some role in overseeing most of the OPEC members, and as far as oil goes we ran them as pretty much client states. The UK and other western powers did dictate the price of oil, and backed it up by force of arms. This still rankles. Well naturally. I believe the UK spy is a stock villain on Iranian tv to this day. It may not suit us, but you can understand their point of view that it is their economic asset, and how it is used should be determined by the owners of that asset not by the users through use of force. Those days are long gone, despite what people think about the invasion of Iraq, but the worry is still there. We have many bridges to build to overcome that history (which is largely forgotten in the west).

And in the meantime, I suggest we put a lot of resources into alternative energy. In purchasing terms it is never a good idea to be beholden to a key supplier with a grudge.