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The thirteen members of OPEC, the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and their ten partners, including Russia, meet this Wednesday by videoconference. On the menu of discussions, a possible increase in production to prevent oil from flaming.
Propelled by the Russian invasion of Ukraine, prices have risen to levels not seen since 2014, exceeding the symbolic threshold of 100 dollars per barrel. The International Energy Agency has decided to release 60 million barrels of oil emergency reserves from around the world, half of which (30 million barrels) come from the United States, all to reassure the markets. What are the markets afraid of? Operators fear that the oil will run out. And the withdrawal of major Russian banks from the Swift interbank system only fuels these fears, believes Francis Perrin, associate researcher at the Policy Center for the New South in Rabat and research director at IRIS.
« Swift, it is often said that it is “the atomic weapon”. I think we have to be very careful with this kind of expression. There are other solutions than Swift », explains the expert. “ You just have to go back to the telephone and the fax. It’s a bit more complicated. So yes, it can have an impact. It can make it harder for Russian companies exporting raw materials, including oil and natural gas, to get paid by their customers. So it can be an element that comes on top of the set of economic sanctions. Sanctions already taken or those being taken could effectively disrupt global oil and gas trade, between Russia and Europe. »
Producing more, not so easy
Faced with this difficult context, what do the OPEC+ countries intend to do? Since summer 2021, they decided to gradually open the floodgates to accompany the economic recovery. But the result is very far from the agreed increase of 400,000 barrels per day more each month. Lack of investment, mainly. Due to political instability or due to Covid-19, some states, such as Nigeria or Angola, have not been able to modernize their infrastructure.
« Not all countries can produce more », observe Francis Perrin. « Everyone will therefore turn to Saudi Arabia, the world’s largest oil exporter, and the United Arab Emirates. These countries which are very close to Washington will obviously be subject to friendly pressure, that has already begun. What will these countries decide? A unanimous decision is required. And there is Russia in the twenty-three. So it will be a somewhat complicated meeting. We expect anyway that at least they aim for more than 400,000 barrels per day in April. But for Western countries, it would not be enough », says the expert.
Producing countries will no doubt have to supply more oil. But for that, they may have to reckon with Iran, which is currently producing below its capacity. If the negotiators gathered in Vienna reached an agreement to save the Iranian nuclear agreement, it would unlock an additional 800,000 barrels of oil per day. This would lower prices, no doubt, but not by much.
A lasting rise in black gold
In the long term, we should probably get used to paying more for all the energy used, believes Thierry Bros, professor at Sciences-Po and specialist in energy issues: “ Whether it’s oil, whether it’s gas, whether it’s electricity, we can clearly see this in the nuclear programs… As energy demand has not fallen, we are obliged to relaunch a very large global program to produce more energy. With, in addition, this military crisis which is coming, there are much more serious things. If Russian oil, gas and coal exports are impacted, the price of oil will rise sharply. »
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A potentially lasting rise, therefore, and which would exacerbate inflationary pressures: “ We forgot that oil was the essential product, not only for energy, but also for producing fertilizers. So you will have all the agrifood prices which will also be higher. We are, in my opinion, only at the beginning of this vicious circle of inflation. The first part, the one we have seen at the moment, is inflation linked to the economic recovery and energy commodities. We will have a second cycle, the inflation of energy raw materials which will continue, and then we will have the inflation of agricultural raw materials “concludes the expert.
The rise in black gold could favor a switch to other energies. But that would be expensive for countries whose main source of income comes from oil.