Last week, the Ministerial Council of OPEC decided to maintain the policy on oil production that was agreed upon in the Algerian city of Oran in the autumn of 2008, with the beginning of the global financial crisis. This policy specified a production cut of nearly 4 million barrels per day, lowering the production ceiling of OPEC member states (with the exception of Iraq) to 24.8 million barrels per day. OPEC's ministers expressed their satisfaction with the price level, which ranges between 75 and 85 dollars for the barrel, as this benefits both producers and consumers. The price level is high enough for the budgets of most oil producing countries. The stability of the implies a decrease of a big negative impact that otherwise harms public budgets as has happened in the past. The present price level is also suitable for consuming nations, as these would need a relatively high price of oil to justify investments in the otherwise expensive alternative energy sector. So why [is OPEC] a lifeboat? Through its policy on oil production, the organization has succeeded in maintaining oil prices at a reasonable level. It has also succeeded, through production cuts, in credibly and sincerely defending prices, in the wake of their collapse at the start of the global financial crisis (falling to nearly 30 dollars per barrel), all without dealing any blows to the global economy. In addition, the majority of OPEC's member states have since injected the necessary funds for investments and new projects, particularly in the petroleum sector, in contrast to the deflationary policies of the industrialized nations which, first and foremost, attempted to rescue their crumbling financial institutions, while approving spending cuts in their budgets. And why is the metaphorical sea turbulent? The road that lies ahead of OPEC is not paved with roses, and is instead full of bumps and pitfalls, in the organization's quest for price stability at the desired levels: There are, first, the global economic crises which are yet to end. Their repercussions are still shaking the economies of western industrialized countries, leaving their mark on fiscal and monetary policies of these countries. They also influence unemployment levels, and hence, the ensuing adverse effects all these factors have on the demand for oil. Second, there are the so-called “currency-wars", which have historically led to trade wars among the major countries as they compete over improving exports at the expense of one another. Then there is the ongoing deterioration in the value of the dollar, which began to raise concerns all while there have not been any effective solutions to this problem so far. Meanwhile, there are chronic difficulties that OPEC faces when it comes to implementing the agreements reached. For instance, the current production level stands at approximately 26.8 million barrels per day, i.e. two million barrels per day in excess of the production ceiling prescribed in the Oran agreement. The reason for this is that some countries are not adhering to their approved production quotas (Nigeria and Angola), at a time when the other member states are committed to the quotas allocated to them. This means that the latter group, which in this case consists of the Gulf States, is producing at less than the full capacity of these states. For example, Saudi Arabia produces about 8 million barrels per day, while its production capacity stands at about 12.5 million barrels per day. In spite of that, the problem of production quotas is currently on the backburner, until the time comes for Iraq to return to the quota system, in particular given the record production capacity being planned for Iraq in the coming years. Add to that the persistent attempts by industrialized countries to develop new alternative energy sources, at the expense of conventional fuels. The best example of this is the turmoil in the markets and prices as a result of the introduction of shale gas, and its' implications for the stability of the gas industry. This is not to mention Germany's decision to continue operating its aging nuclear power plants for decades to come, despite strong domestic opposition. There are also the ongoing media campaigns in the industrialized countries that promote "pipe dreams" when it comes to alternative energy sources, as though these latter will replace fossil fuels at any point in the foreseeable future, or produce no pollution. A good example of this is the hidden financial support provided by the governments of industrialized nations for alternative energy sources, while simultaneously imposing high taxes on oil, which creates a kind of ambiguity in determining the actual costs of the various types of fuel. The campaigns mentioned above also promote the idea of “peak oil”, which casts doubt on the ability of oil-producing countries, especially in the Arabian Gulf, to meet future global demand for oil. This exacerbates the problems of investing in the oil industry and incites the public opinion against it, progressively and adversely impacting investments in this industry or demand for its products. Last but not least, there is the issue of growing and ongoing political differences among OPEC member states themselves. Of course, this is not the first time, nor will it be the last time, that disputes have arisen among the member states. Examples abound, but perhaps the most important one is the Iraqi-Iranian war in the eighties, in addition to environmental challenges and the efforts to produce ecofriendly petroleum products that are in line with new environmental laws and regulations. It is clear that the ministers of OPEC congratulated themselves in last week's meeting for their accomplishments. However, the truth is that their path is still strewn with difficulties, and these ministers are aware of this. This begs the following questions: Can the organization continue to deal with various issues in the same spirit of wisdom and resourcefulness that it pursued in recent years? Also, will some countries agree to adhere to the positive policies that have proven to be beneficial for all member states (through the stability of prices at reasonable levels)? *. Mr. Khadduri is an energy expert
