By Kim Kemp
The supply and demand situation of oil is a result of OPEC’s reluctance to reduce production, combined with an ongoing increase of shale oil output, according to Khalid Alo Khater.
Speaking at a conference in Doha, he said oil prices were unlikely to improve to $70 or $80-a-barrel before 2019 under these conditions.
The conference was held by Arab Center for Research and Policy Studies to debate the impact of low oil prices on producing countries.
Mamdooh Salama, a consultant at the World Bank in Washington, DC disagreed, saying he saw crude rates bouncing back to $70-80 per barrel band by 2015-end.
“Prices might fully recover by next year,” he said.
Qatar’s former energy and industry minister H E Abdullah bin Hamad Al Attiyah said it was not right to expect Opec to reduce production to help stabilise prices in the global oil markets, The Peninsula reports
“If Opec members reduce production, the gap will be filled in by non-Opec producers…These are the countries that have always refused to cooperate with Opec members,” he stressed.
He pointed out one of the main reasons for the price downslide is slow economic development in China, a large consumer of oil, besides India. “But no one is asking why there is suddenly this economic slowdown in China,” he said.
The GCC states must change financial and economic policies and reduce state subsidies and support for citizens — which have been growing with the population.
Other speakers agreed with Al Attiyah and said the GCC states have been talking about diversification for a while, but tend to mostly diversify their economies into fields related to oil-like petrochemicals.
(This is contradictory to Qatar’s focus, given the high priority that it places on diversification, with a non-hydrocarbon sector that is sustaining the economy. In the first half of 2014, exports, dominated by hydrocarbons, were the single largest component of demand, accounting for 73.3% of GDP: Ed.)
Experts said that, rather than focusing on demand and supply factors, there was a need for a deeper understanding of the causes associated with the oil price fall, highlighting that the demand and supply situation is largely influenced by geopolitical factors, they said.
Blame has been laid at shale oil’s door, because oil prices were set at $110 a barrel in September 2014 and a year later have plummeted to around $40.
While Opec decided to keep its production levels unchanged in November 2014, in June this year, it said the responsibility to stabilise world oil prices should not rest on its shoulders alone.
Salama said Opec’s decision not to reduce production had led to a 57% decline in oil prices.
He added that US shale production is going up, producing six million barrels a day in 2012 and reached 8.5 million barrels last year.
Other experts said Opec’s share in the world oil market had shrunk to 30%.
