Towards Ensuring Global Energy Security
- 4 March 2006
The Organization of the Petroleum Exporting Countries (OPEC) did well by calmly responding to the call made by certain oil-consuming countries, namely the United States, to reduce their people's dependence on oil. However, OPEC did describe such calls as a serious threat to the security of the global energy market. Oil markets have been experiencing a considerable increase in prices in the past few years, primarily because of a sharp increase in demand due to strong global economic growth. In the wake of the exponential rise in demand, OPEC member countries have not only been pumping out crude oil to their maximum capacity, but have also undertaken the task of expanding their oil production capabilities. Irrespective of the huge investment costs, they have allocated billions of dollars to expansion projects aimed at meeting the burgeoning global demand. Oil-producing countries have always viewed the process of expanding resources as a means for securing stability in the oil markets. Therefore, the plans for current expansion projects have not been unreceptive to the persistent calls made by oil-consuming countries for increased production to secure market stability. Yet, the success of these expansion projects inevitably depends on the security and growth of global demand for oil. Consequently, the polices declared by major oil-consuming countries, such as US President George Bush's plan to reduce America's "addiction" to oil by cutting oil imports from the Middle East by 75% till 2020—a region that produces around 40% of the total oil supplies—and the repeated European calls to increase the use of non-oil alternatives, will only upset oil-producers' plans for expansion. The oil-producing countries may even consider putting a freeze on their plans until they get a clear picture of the consumer country's energy policy and the possible impact on demand. No project, regardless of its size can start before having ascertained an adequate demand for its product.
Therefore, instead of adopting impulsive policies prompted by parochial interests and short-lived exigencies, there is a need for greater cooperation between producers and consumers. The aim should be to maintain stability in the most crucial market of the economy by focusing on the basic factors of supply and demand and by keeping way from confusing calls that upset stability.