Fuelled by cartels

OPEC must not cut output, as is being demanded by Iran

One of the only pieces of good news on the economy came on Friday. Oil prices hit a 13-month low, coming down almost 50 per cent from their July peak of 150 a barrel. Prospects of a deep global economic slowdown and the credit crisis have had an impact on demand for energy. In fact, the International Energy Agency has forecast a further dip in prices. Arguably, a fall in prices was already on the cards, as every indication was that oil importers could not bear the sustained consequences of oil at 150 a barrel. Even oil exporters like Saudi Arabia had during peak season indicated doubt about the sustainability of expensive oil. The argument being that, one, just the economics of high oil prices would force curbs in consumption, and, two, such prices would make economically viable the search for alternative sources of energy.

These, however, are arguments that find resonance only amongst regimes that see themselves as long-term stakeholders in the global economy.

Predictably, regimes like Iran8217;s and Venezuela8217;s do not, and Tehran demonstrated this over the weekend. Its oil minister, Gholam Hossein Nozari, announced that Iran would seek a cut in output at OPEC8217;s emergency meeting in Vienna on November 18. Making a case for market stability, he said that oil at less than 100 a barrel would not be in the better interests of both producers and consumers.

Nozari would have inspired confidence if such desires for market stability had been voiced at a time when oil was getting more expensive by the day. They were not. This is why Iran8217;s demand for a cut in output should be seen to be what it really is: an ideological facade for a hunger for petrodollars. Iran has been at a perversely fortuitous juncture. Besides rising demand, oil had also become dearer because of a crisis of Iran8217;s own making, its standoff with the IAEA on the nuclear programme. Nozari is part of a regime that is responsible by its actions for sanctions that prevent proper development of its oil industry. To allow it to play an injudicious politics of oil would be a great failure by OPEC.