OPEC, now at the end of the trail, must put up or shut up

Implications:   Simon Webb (Reuters) in Jidda reported in the June 21-22 issue of the International Herald Tribune that the energy powers will hold an emergency meeting on Sunday. The object of the meeting is stop the upward spiral of crude oil prices. The Saudi government in Riyadh summoned the chief executives of the international oil companies as well as consumer representatives. Oil markets speculate about the meaning of it all. Oil Minister Ali al-Naimi told the UN Secretary General Ban Ki Moon that Saudi Aramco would raise output to 9.7 million bbl/day beginning in July. U.S. officials said that they expected no announcements on increased oil output. OPEC officials say oil supplies are adequate. The president of OPEC, Chakib Khelil said demands by consumer countries were not rational. He cited speculation and limited refinery capacity for the present situation. Investors expect oil consumption in Asia to far exceeds lower growth in the Western countries.

Analysis:  Never ending boasts of fabulous reserves and high production capacity by OPEC members have now put them in the unfavorable position in the eyes of an energy-starved world. One person attending the meeting is Chevron’s David O’Reilly. His company discovered the big oil fields in Saudi Arabia and his engineers estimated the reserves. Does he listen patiently to the various dissimulations of the OPEC sheikhs or does he put them in their place with facts he no doubt has in his brief case? Exxon Mobil is equally informed about Saudi Aramco’s reserves. BP and Chevron know the exact status of Kuwait’s reserves and capacity. Royal Dutch Shell, Exxon Mobil, BP and Total executives know exactly what are the reserves of Iran. The same is true of every OPEC state. One or another of the major oil companies know what is there. They are not the only ones, of course. Those of us who follow international oil and gas activity have a pretty good idea of the reality. Especially well-informed are those of us who have drilled those wells, looked at the electric logs, squeezed off bottom water, set gas exclusion liners and put the wells on production. We know. So now is the time for all good OPEC members to come to the aid of international society. It is time for honest representation of crude oil and gas reserves and accurate predictions of present and future production capacity. Once the myths and unrealities have been swept aside, the world’s oil men can properly address the requirements of the consumers. Politicians can cease their railings against an OPEC now perceived as uncooperative. This has to happen. Did Saudi Arabia summon the big oil dogs to clear the air or blow more smoke? Stay tuned for further developments.