Is oil price around 100 dollars again?

A significant increase of oil price – 100 dollars a barrel – is expected by Mohammed bin Hamad Al Rumhy, Minister of Oil and Gas, Sultanate of Oman. In the interview he gave to alapblog.hu, the influential expert and politician said: he thinks that at the summit of oil exporting countries in early June, or at the following meeting, the majority of the member countries are going to unite against Saudi Arabia who is interested in sustaining high extraction rates, and together they will cut back total extraction by ten percent. However, he does not believe that the collapse in oil prices was caused by a Saudi-American conspiracy against Russia, Iran, and Venezuela. According to the interviewee, only the radical increase of supply was behind the price crash. Concerning the Mol stakes in his government’s hands, he says that Oman is satisfied with the Hungarian corporation, which is carrying out promising oil reserve explorations in his country. We interviewed the minister in Berlin.

Péter Zentai: Everything suggests that the fall of oil price has stopped; lately, the price of this natural resource that your county is enriched with has been on the increase again. Are you satisfied with the price tending toward 60-70 dollars a barrel?
Mohammed bin Hamad Al Rumhy: I am not; I think this is not enough. It would not be good if it stayed this way. Neither for us, not for the importing countries…

Why would it be good for us? Finally, recession has ended in importer countries, national economies are beginning to boom – all thanks to the collapse in oil prices. Of course, this price increase is good for Mol, since Oman with its 10 percent share is one of the major owners of Mol…
We are satisfied with Mol. Its management is excellent; furthermore, their recent drillings in Oman are very promising.

The price of its shares is increasing.
We are welcoming it. Of course, the important thing is that pushed down oil prices are beneficial to importing countries only for a short time. Take my words, cheap oil holds back technological innovation, and finding and utilizing alternate resources, and leads to wasting and exploitation of the Earth’s resources.

Actually, it is only bad for oil-producers…
You mix up primary oil-producers with oil exporters – just like almost everyone else. For instance, Russia is a major oil-producer, but its role is insignificant in the world’s oil trade; the Russian economy utilizes a significant part of the Russian oil. However, my country, just like most of the OPEC (Organization of the Petroleum Exporting Countries) member countries depend very much on oil export, national usage is hardly significant.

Putting it in other words, low oil prices are bad mainly for you, oil exporting countries…
We are wealthy enough, we can endure it. Together with the Gulf states, we are carrying on. However, oil exporters such as Venezuela or Iran – they suffered from the price drop…

Here in Berlin, the United States Secretary of Energy said that if the price of crude oil stabilizes around seventy dollars, it will benefit everyone: both the consumers, exporters, and the producers as well. I think this is a good argument.
I do not agree with this. Why would I sell oil for seventy dollars a barrel when I can sell it for a hundred?

So you would increase the price to a hundred? How would you achieve it?
We have to cut back on extraction.

Saudi Arabia, the world’s leading oil exporting country is strongly against it. Do you want to confront them?
Why not? Oman is not a member of the OPEC indeed, but formal membership has no significance because we cooperate anyway. Saudi Arabia provides one third of OPEC’s export; by the cooperation of other members, its influence can be reduced, since together they make up two thirds of the total export. In the foreseeable future, the price can reach 100 dollars.

You mentioned Venezuela. It needs cash as soon as possible otherwise it will collapse. Iran faces serious problems as well. Meanwhile new oil exporters, such as Ghana, are entering the market. America has become a net exporting country… How could a unity of oil exporters achieved in such circumstances? How could prices increase?
I think Saudis are seeing it wrong. It is an incredibly wealthy country, which is interested in nothing but keeping its market shares. The others – unfortunately – are interested in actually making profit. However, it would be more beneficial to them and the rest of the world if they did not waste a limited natural resource, but prolonged its lifespan, and sold it for more. If we could get 200 million dollars for two million barrels, why would we sell three million barrels for significantly less? After all, we hardly get more than 150 million for those three million barrels of crude oil.
You do not have to be Einstein to calculate the benefits.

Don’t you think that this is more about politics than mathematics for the Saudis? Obviously – working together with America – they want to weaken Iran, Venezuela, and Russia…
I do not believe in conspiracy theories. Falling oil prices were caused by market developments indeed: the American shale gas revolution, the discovery of new reserves around the world, the narrowing down of the Chinese energy import, European economy falling into recession or stagnating… So the oversupply and the shrinking demand were behind the price collapse.
The time of politics has arrived: making a decision to increase oil prices together and stabilize it at an even higher price.