Oil prices remain above the $100/bbl level, with expectations that prices will maintain a level of $100/bbl or more throughout the year. Last week, the Saudi Oil Minister Ali al-Naimi said that Saudi Arabia has cut its output in March by about 800,000 bbl/day, while noting the Kingdom's readiness to offset the shortage in Libyan oil production. Meanwhile, OPEC's Secretary General Abdullah al-Badri also announced last week that, according to the information currently available, crude oil prices may not fall below $100 /bbl. He pointed out that supplies are adequate and are able to meet global demand, and said that there is surplus production capacity available, while stressing that output levels in March would remain the same as last December's, despite the disruption of supplies. In other words, there has been a compensation for the disruption in production. The OPEC Secretary General also said that OPEC has fulfilled its role and carried out its commitments in achieving balance between supply and demand in the markets, and in compensating the deficit in oil supplies. This means that the time has come for the consumers to play their role as well, especially in terms of reducing taxes on petroleum products in their countries; extraordinary circumstances require extraordinary measures. The OPEC member states had rushed to increase crude output at full capacity, and even tapped their surplus production capacities. Indeed, these measures helped offset the shortage of Libyan oil exports, which fell below their previous level of 1.5 mbd/day. In truth, OPEC's supplies even created a surplus in the markets. What can the industrialized nations do to curb high prices then? There is the option of decreasing the lofty taxes they impose on consumers. There is also the option of tapping their strategic petroleum reserves or passing stricter regulations on speculators, to rein in the effects of speculation on price hikes in a more reasonable fashion. The oil-consuming industrialized nations are required to send clear signals to the markets that they are interested in seeing prices fall. This cannot be done by exclusively blaming high prices on oil-producing countries. Rather, the industrialized nations must also make it clear to the markets that they may adopt certain specific policies in this regard. Nonetheless, this does not mean that any such measures must be radical. All they need to do is express their interest in price levels by showing their seriousness about implementing certain policies. Of course, the markets did not see anything of this kind recently, which means that both the markets and the speculators are convinced that prices will continue to rise. So why are the industrialized nations not taking the necessary steps to rein in prices? The answer to this lies in these countries' determination to promote alternative energies that can compete with oil. Were it not for high oil prices, it would be difficult for these alternative energy sources to commercially compete with oil. Naturally, the following question arises: Is there an actual shortage of oil supplies in global markets? The primary indicator of oil shortage would be the level of commercial oil inventories in major industrialized countries, and the information on these is usually issued by energy-related departments in the majority of these countries. Currently, these levels remain high, and hence, the industrialized countries are fully aware that the oil supplies available are sufficient and that there is no reason to be concerned about any possible supply shortages. Needless to say, there are concerns in the market regarding the possibility of Arab uprisings spreading further, or GCC-Iranian disputes being exacerbated, and also regarding the possibility that global demand for oil may increase beyond 89 mb/day. In addition to these concerns troubling the markets and fueling speculation, there is the potential for unrest in Nigeria, after the presidential elections there, and the victory of incumbent President Goodluck Jonathan who won a second term. Jonathan is from the Niger Delta, i.e. from southern Nigeria. Following the official announcement of election results, widespread protests and incidents of large-scale violence erupted in the north of the country. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
