With the rising crude oil price, the OPEC+ is once
again under an intense spotlight in the run up to its next monthly meeting, scheduled
to be on July 1.
In the past, although the suspense had been building
for weeks before such meetings, the outcome turned out to be neither dramatic
nor exciting; more often than not, it was like going into labour to giving
birth to an elephant calf, only to produce a mouse pup!
In short, they were never like the hype usually
associated with the launch of new Apple products or certain game consoles; as
far as crude oil sector is concerned, the outcomes of OPEC+ meeting have always
been foregone conclusions.
It may be the case in the forthcoming meeting too on
the first day of the next month, unless a last-minute intervention from an
influential non-member of the OPEC+ comes about.
The organization has been come under immense
pressure in the past few days, especially from the crucial customers in Asia,
asking the cartel to rein in the prices.
The Indian minister in charge of the oil sector, for
instance, had a series of discussions with Mohammed Sanusi Barkindo, the
Secretary General of the OPEC+, in the last few days in finding ways to
maintain the price in a narrow band so that both consumers and producers can be
protected.
The Indian oil minister discussed how the rising oil
price could damage the economic recovery, not only in India, but also in other
developing countries as well.
This is not the first time that the Indian oil
minister voiced his concern over the rising oil price. In the past, he did it
on a few occasions – only to be ignored by the OPEC+. At some point, it developed
into a less-than-mild spat between the minister in question and his Saudi
counterpart.
This week, both benchmarks, WTI and Brent, reached record high since 2018.
In India, the price of oil at the pumps has been
rising at an alarming rate and its impact on many sectors has already been felt.
The opposition is gunning for the government for not doing enough to bring down
the oil price, because the taxes levied on fuel in India is quite substantial.
Since the government revenue has plummeted due to
Covid-19, no Indian government will have a room for manoeuvre in cutting down
on taxes – in the current circumstances.
This may be the reason that the oil minister pleaded
with the producers to keep a price at a reasonable level while collectively
safeguarding the interests of both consumers and producers; whether or not the OPEC+
will take heed of the advice is something remains to be seen in the next week.
It’s not just Asia that feels the pinch when the
price of crude oil rises substantially; even in the United Kingdom, we feel the
rise at the pumps. In this context, even the Western governments may be
compelled to ask OPEC+ to deal with the issue that could damage the prospects
of projected economic growth.
When President Trump was in power,
he used to taking up an additional role of being the spokesman for the beleaguered customers worldwide,
when the oil price rose sharply; not only did he air his frustration, but also
pressurised the OPEC in general, and Saudi Arabia in particular, to bring it
down; it often worked, although he did not usually earn the credit for doing
so!
With a few days left before the next meeting, there
is a strong possibility of someone very senior in the current US administration
making yet another telephone call to an influential OPEC+ member – perhaps at
the eleventh hour, which could potentially keep the cartel off the agreed
agenda by then.
