DOHA MEET WAS A "NO NA" MEET - AS WASTEFUL AS AN OIL SLUDGE
By Ruma Dubey
The much awaited Doha meet is finally over. And like all knew all along – nothing, zilch came out of it. It was could have been a historic meet in the sense that after 15 years, the oil producing countries ( they claim it was not exactly an OPEC meet) were looking at changing production figures or what they call, ‘freeze’ production targets. Oil prices had started surging in anticipation of this meet – more of speculative forces and today, with the meet turning out to be a damp squib, oil prices have fallen once again. Petrol prices were hiked in India last in first week of April and yesterday, post the meet, there was a cut in the price. Thus for India, failure of Doha meet is good!
The Doha meet was supposed to be a meet about oil production targets but what it instead turned out to be was the show of “who is in charge” and a platform to exhibit geopolitical tensions.
Saudi Arabia is the one which played spoilt sport for the oil producing countries. Late 2014, Saudi had made an emphatic statement that it would not cut production even if oil went down to $20/barrel. But a few days ago, with falling profits indeed hurting the Kingdom, a mixed signal seemed to be coming – it looked as though despite Iran, Saudi might actually agree for the freeze. But last week, the all-powerful deputy crown prince, Mohammed bin Salman said that Saudi will not sign any deal without Tehran also toeing the line.
Two under currents behind Saudi’s stance. Firstly, the geopolitical tensions between Iran and Saudi is well known, with each on the opposite side of two warring countries – Syria and Yemen. Tehran did not even send a representative to attend this all-important Sunday meet indicating what it really thought about the Doha meeting. Unless and until Saudi and Iran can keep their political tensions away and then come to the negotiations table, nothing can be achieved in any meet. If the same attitude persists, the June meeting outcome would be no different from the current one.
The second reason could be the deputy Prince Salman flexing his muscles within his own country to show, who was in charge. The long serving oil minister of the Kingdom, Ali al Naimi and Salman have been warring within. In fact there was high drama when Salman tore off the first draft of the oil deal prepared by Naimi. The prince is all for privatization of state oil company Saudi Aramco and lower the country’s long-term economic dependence on oil. This, obviously, Naimi does not support. So many say this in many ways, was showing Naimi where he stood.
This politics apart, what happens next? Today oil prices have come tumbling down, as expected. But another oil producing country, Kuwait is giving some cushion. The domestic workers’ at Kuwait’s oil fields have declared a strike since yesterday and oil production has already come down by two-third per day. This lowered production could anchor a free fall of crude.
This failure of Doha talks and the ensuing oil price crash could be a temporary thing. Even if they had decided on freezing oil production, it would not have helped much as the freeze would be at current high levels. So there would have been no change in the glut situation; it would have been just a psychological victory.
While many say that oil could slump back to $30/barrel levels, that might be unlikely and oil could meander around the same levels for more time to come.
In all this, the biggest casualty though has been Opec. After this meet, where it was Saudi which called the shots, one cannot help but wonder about the relevance of Opec. Three non-Opec members – Russia, USA and China have been ramping up their output showing a change in this world ‘oil balance’; though Opec controls one-third of the oil production in the world, it is a cartel without any tooth and nail – no power and no influence, on the brink of becoming irrelevant.
What does all this mean for India? Lower or even current level of oil prices bode well for our coffers. We have nothing to do with this politics of Opec, Saudi and Iran but being the fastest growing economy in the world, surely we need to be aware. It is knowledge alone which has the power to control access to opportunity and advancement.