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Don’t worry, the latest OPEC spat will play out soon to the best interests of all

Don’t worry, the latest OPEC spat will play out soon to the best interests of all

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The latest disagreement in Opec is similar to several previous ones – except for the taking it out of its context for certain purposes.
Image Credit: AP

It has been 60 years and more since OPEC (Organisation of Petroleum Exporting Countries) was founded in Baghdad. All through its turbulent history, the grouping has witnessed disagreements and efforts at one-upmanship between member countries. Often, these differences have led to the near collapse of the organisation.

But the interests of OPEC’s member-states and their awareness of the importance of some degree of agreement have ensured the world oil market retains a measure of balance and price stability. This has prompted them to reach compromises and contributed to transforming the organisation to an ‘OPEC+’ status after the closer associations with Russia and Kazakhstan.

The latest disagreement is similar to several previous ones – except for the taking it out of its context for certain purposes. We have followed OPEC meetings since we were university students in the 1970s and 1980s due to their importance for our countries and economic futures. There was never a permanent disagreement between two countries – the differences have always been between two groups that have divergent interests on certain matters.

Does the nature of the new disagreement differ from all the previous differences in the past 60 years? The answer to this question will raise questions through which many important conclusions can be drawn. We believe that it does not.

Nature of the spat

The first group, which includes Russia, Iraq and other countries, have called for extending the baseline of oil production and output cuts until the end of 2022, while the other group seeks to change the base ceiling. This group includes Kazakhstan and Mexico, although the latter have not announced their position openly.

So, why is some international media distorting the nature of the disagreement into a dispute between two countries? Some Arab media have been dragged to this juncture without analyzing the nature of previous differences.

Stoking tensions

Here, the danger lies in misleading public opinion to create an atmosphere of heightened tensions or to achieve other purposes. Especially since the current disagreement is not comparable to the deep differences within OPEC in past decades. Even then, it was able to overcome all such issues without disturbing the relationship between countries in the two opposing groups. This clearly means that the current disagreement can be overcome thanks to OPEC’s accumulated experiences, through compromises that satisfy all parties.

The OPEC spat will be resolved sooner. The common interests and friendly relations between the two groups will eventually impose themselves into shared solutions. Everyone is avoiding last year’s scenario when prices collapsed below $20 a barrel, and even reached a negative price of minus $40 a barrel in the futures market for the first time. However, the situation was quickly overcome. Last year’s experience was bitter, particularly because it coincided with a drop in oil demand by 30 million barrels per day due to the pandemic.

A common point

Going back to the origin of the disagreement between two groups, the fact is each has its own reasons and demands, but the interests that unite the countries in the two groups are undoubtedly greater than the disparities. This will facilitate an eventual compromise that preserves the gains of all member countries and leads to oil market stability, which is important to a world economy still caught in the overhang of the pandemic.

The writer is a specialist in energy and Gulf economic affairs.

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