Venezuala and Iran : Chavez and Ahmadinejad Pressuring OPEC

Outside his regular meeting with the Iranian head of state, Mahmoud Ahmadinejad, who is visiting Venezuela, Venezuelan president, Hugo Chavez, announced on Saturday the nationalization of all oil activities (production and marketing) as well as of electricity production and distribution. This will still leave a place for foreign corporations to keep minority shares, after state control reaches 51%.

It remains to be seen if the announcement of these measures, coupled with Venezuela’s decision to set up a joint Venezuelan-Iranian petroleum corporation, is sure to have an impact on a market in which the price of crude oil is below $52 a barrel, a fall of more than 30% over the last two months. In order halt the continuing slide of the price of crude, the two heads of state committed themselves to proposing reduction in oild production at the next meeting of OPEC (the Organization of Petrol Exporting Countries), which, since last December, has a new member : Angola.

According to many experts, the fall in the price of crude, which represents a lossof $500-million per day to the OPEC members compared to last year’s prices, is likely to become more marked in the next few months, driving the price below $50, and ending up closer to $45 a barrel. This downward tendency is not simply due to global warming, but to an excess of supply over demand and an increase in US security stockpiling. These security stocks have increased at a rhythm of 600,000 barrels a day, or the equivalent of nearly half of what Algeria produces a day. The excess in the offer of oil is being encouraged by Washington via its Saudi and Kuweiti allies, under the pretext that a high price of oil harms global growth.

On September 11th, in Vienna, hadn’t Saudi Arabia already argued that the decline in the price of crude “is to be welcomed, since it provides relief to consuming countries, at a time when the world economy, after four years of high output, is showing signs of fatigue” ? In fact, thanks to its surplus stocks, Washington, by far the world’s principal consumer of oil, can influence prices, by drawing directly on its stocks and consequently importing less.

In spite of the pressure being applied by Venezuela and Iran, with the support of Algeria, and, to a lesser extent, Nigeria, OPEC rarely agrees a drop in production, the ceiling of which is presently around 27 millions barrels per day. At the same time, the demand has dropped considerably. In fact, certain member-States of OPEC, wanting to remain on cozy terms with the Bush administration, are refusing to lower their production beyond a threshold at which prices would begin to rise. This is the case of Kuwait, which declared itself last Tuesday against holding a special meeting of OPEC, and which wants to keep to the production levels that had been decided, at the last meeting of the oil cartel in Abuja (Nigeria), i.e. a drop of 500,000 barrels per day, starting on February lst.

Meanwhile the price of a barrel crude keeps falling.