sometimes. markets. can only. find out what's really happening to the global economy because reports. it is half past the hour here in moscow you with god see that's the rundown of the top stories now and this just in the czech republic has pulled out of the u.s. defense plan for europe and james to protect the continent from any potential threat from iran the czech defense minister told reporters that the decision was made out of frustration at his country's a minor role in the project. police use tear gas against thousands of furious anti austerity protesters trying to block access to parliament but all makers are

to vote on a new public cuts in order to secure another international bell. on the leaders of russia and china joined central asian counterparts for a key summit focusing on fighting extremism and drugs the president's afghanistan and iran are also attending the tenth anniversary as c.e.o. meeting in stuff. microsoft headlines here what i would see up next people about and as guests debate whether opec is still relevant in the modern world that some crosstalk coming your way. you can. stay. low and welcome to cross talk i'm peter lavelle that is being described as one of the worst meetings we have ever had is the organization of petroleum exporting countries or opec in crisis if it is doesn't really matter and with or without opec

are we destined to live with very high oil prices. can. you cross-talk the controversial role of opec today i'm joined by bill found price in london he is the founder and c.e.o. of petroleum policy intelligence also in london we have dominique cherish l.-a he is a founding partner of the energy management institute and in boston we cross to robert kaufman he's director and full professor in the center for energy and environmental studies at boston university ok gentlemen this is crosstalk that means cross talk rules are in effect you can jump in anytime you want but before let's take a look at how the world has been reeling since last meeting. when last week's opec meeting ended in this court for the first time in two decades it left oil consuming countries and analysts and editor speculations about the cartels imminent demise and fears of higher oil prices have abounded after the arab spring changed

the political landscape in the middle east exposing deep divides among opec's twelve members. we have no other choice but when iran ordered saudi arabia's attempt to raise production quotas it became evident that the group was anything but united poised to assert its influence in the region rapidly changing to popular uprisings and sectarian turmoil iran defied saudi arabia's proposal to change production policy but aim to add one point five million barrels of crude a day to the market venezuela libya and five other members chimed in blaming high oil prices on speculators if saudi arabia does go ahead raise your production you could really we could be looking at the end of opec right now but as the world braces for saudi arabia to act which it said it would analysts warn that higher crude prices could seriously threaten the oil market already strained by its higher supply from a bad old libya the head of opec sought to assure that the market was flush with

oil and there was no reason for concern. this time know. we have enough should be in the market will go with the options of. the u.s. which has been hoping to cash in on its partnership with saudi arabia and drive down the price that has surged by twenty percent in the last year was displeased with the outcome of the meeting white house spokesman jay carney insisted the current supply did not match the demand and so the country could be looking to tap into his strategic reserves others have sought to assure that in reality the stalemate needs little and that opec members are already putting more oil on the market than there agree could as prescribed everybody cheating everybody. but watch what they do. so should there this been dismissed altogether the world has already watched opec whether war between chill of its member countries iran and

iraq as well as the invasion of kuwait in one nine hundred ninety and one thought meeting is scarcely enough to dispense half a century old organization or is it will seem december when the twelve members need to prove they can still serve its purported function of ensuring a stable oil market also charney for crosstalk. ok dominic if i can go to you first in london is ok crisis because ever since we met we have to keep hearing there's no crisis or no papers no crisis and opaque everything is fine it sounds like they're protesting a bit too much what is the state of opec right now. well i think i don't know if i would call it a crisis i would just call it a. further pushing of saudi arabia you know doing what they want to do i mean for the last some years it's almost been everything that gets done in opec and saudi arabia actually does it because they have the capability of supplying more on with

the market and they've basically been getting consensus from opec. at this stage of the game it seems that the more price hawks within opec those that do not have the capability of having surplus capacity into the marketplace i guess i'm just tired of sanctioning saudi arabia and i think in the long run i think it's good for the consumer it's actually good for saudi arabia because at least until the summer saudi arabia can act upon their own instincts is to put more into the market if they see fit to do that which in fact they said they will do and there's no reason not to believe that they won't do that so i think opec opec is really you know it's not in my view ever been a cartel it's much more of a burden sharing organization in that you know saudis continue to take most of the burden and so at the end of the day they are the ones who want to have a lot more say in what's going on and you know they just think it sanctions this time but i think one of the opec's going to go away but i certainly do not think that opec is going to be or have the level of relevancy as it had as an organization until which time that we get into

a massive downturn in in the need for ok and that is a look likely bill it's very interesting because if you look at the history of ok called economy seems never get its act together when there is a crisis when prices are going down now when there are high prices so i mean is that going to take that for opec to find some kind of cohesion again. you know no i think you're absolutely right opec has a much better history of. prices a week and when they need to cut production than when prices surging are we just as recently as two thousand and eight just prior to the financial crisis we saw that they let prices get away on the upside. there's a reasonable debate about how much oil prices will causative to the the financial crisis but the argument clearly is that they're slightly more tolerant of prices and they are low so i think if you look at the history of crises that it's been through where you've had to run iraq wars in the eighty's the gulf war in the

ninety's you know i think this is actually pretty small beer on the overall overall . you know limits of the sort of political involvement they have each other but. you can be sure that even if exist it would come into existence because when prices go too low these producers what. ok robert if i go you want and one of the interesting things is about this particular crisis you know if we want to call it that is that a lot of the major producers are looking a break even point now and they're breakeven points for their budgets are getting higher and higher and higher and we're in every expression if you look at the gulf countries when they have to i'll use my terminology they are their part their populations in light of what's going on with the arab spring so is this one of the reasons you did the price issue is not so concerned about is it goes up because they really i think have like the extra cash. well you know who do who doesn't like a little extra money but again. that whole issue of.

paying off your population really gets to the heart of the price hawk crisis of matter in it's the price dogs who have a relatively small population of payoff and it's the price hawks with larger populations or smaller supplies of oil that really have to kind of wring every little penny they can get out of every barrel in order to keep their populations happy you know the many comments of this is just a grudge match between iran and saudi arabia because we can't take the political dimension out in and i think most people say the history of opec is that if buzy been able to be pretty good at putting politics aside but now it looks like that's not that's changing is that something that's going to stay with us it could very well be i mean at the end of the day i think the most important matter here is that saudi arabia and to a very minor extent the u.a.e. and kuwait the only ones that really have the capability of driving prices down how

much they can drive them down that's a whole other issue but they are the only ones that can these other countries like iran and iran all the role here is to act in as an opposite the saudi arabian yes i think there's politics associated with i.d.s. i think that the relationship between saudi arabia in the united states is one that probably doesn't favor well with the iranians and several of the other more price wars within opec so i think there is some politics here and i think that iran is trying to assert itself by bringing this contingency to go ahead jump in. you know there's a lot of politics going on here in iran and saudi arabia have very different interests in that iran really needs all the money you can get to really pay off its population witness what happened last spring witness what's happening with the economy and so any really any decline in prices really threatens to undermine the stability of the regime in a way that the saudis are not threatened by slight price decreases and furthermore

the saudis of a couple of these other countries they have huge investments over seas and if will prices go to high in the and the oil consuming countries go into recession then the saudis are losing they're making money on their oil but they're losing money on their overseas investments and so that it it's a net loss for them so really your in ization with very different political positions i don't think you want to reply and i agree with everything you said quit go ahead dominic oh i mean i really just i let i just say what he said with. ok bill do you want to jump in there. you know i just wanted to say that you know i totally agree with the other panelists that you know certainly iran has no problem with sticking its finger and making trouble in whether it's you know perk or elsewhere in the middle east north africa but but but i think there were some

genuine economic disagreements at this meeting as well i mean i was there spoke to the delegates i think that there is a concern among. many of the producers outside of the gulf that we're already seeing some oil demand destruction from oil prices and we could be out of it in a bit of an inflection point here so i don't think it's entirely about politics i think i think it's wrapped up with that but but i think that there are some differences in opinion about where all prices could go in the second half of this year and where oil demand could go. but i totally agree with the your introductory report which said that you know it's more important to look at what i'd say saudi arabia does rather than opec says and i think that that is the key to this because ultimately as you say you know saudi arabia is the only one with spare capacity so the only one who can act i've been to the bay and everything else has been pretty much assured ok domini is a shortage is there a shortage of oil on the market here because it's

a big discussion about that we see really any need for more oil go ahead no not right now there's not there's not a shortage of war there's a shortage of there's a problem with chloe's with a lot of libyan oil certainly that that that's a much higher quality oil that has put a strain on north sea oil and some other welfare but in general no there's no shortage of well right now to go the whole discussion is basically looking towards the second half of the year and what the previous plan was just mention there has been some to mean destruction you know the best the best solution to the high price of oil is high prices because we will get some of their society of the me and i'm sure that that's a concern all right gentlemen we're going to jump in here we're going to a short break and after that short break we'll continue our discussion on opec state authority. is the biggest suburban.

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the emission free cretaceous three times for charges free. range month free risk free stews types free. download free bontemps plug in video for your media projects and free media john to our teton tom. murray can. come up. if you want to. welcome him to prosecute a little tree mind you were talking about opec and high oil prices. come up and. say. ok robert if i go to you in boston i mean ok i want a half century old. now and what it is is the only environment changing more than

it was then half a century ago and now because we have new players or relatively new players that are have very large growing economies something in china and india which really were not part of it dynamic a half century ago i'm getting at high oil prices there's demand there is this is so high and continue there for for i mean to add in food item go ahead well the big change yes you're right there are big changes on the demand side but there are even bigger changes on the supply side and that is for the first forty years of opec's existence. no no impact will production was actually increasing to some degree in lockstep with opec production to keep up with rising demand but since two thousand and four there's been no net increase in non opec production and so what's happened is as oil demand has increased in places like china and india it's all had to come from opec and that's really given opec much greater leverage

than it's had during let's say the first forty years of its existence and now we really are looking at a different environment where it's not where there are alternatives to opec oil are not readily available and so simply slowing economic growth and demand for oil in india and china is not going to be enough to relieve pressure on prices so no there is no shortage of oil yes that you and i had to many communities that i was going to i pay jeffrey i mean it would mean that of the first forty years of opec we lived in a world of a supply constrained model where clearly in a demand driven model right now and you know how for how long and how big that the military does ok well i think we are to the manager of a model though you know we're going to be going to hand it hasn't global oil demand has not really grown significantly faster over the last five or ten years what's

changed is that not opec production has not grown since two thousand and four and so they're going to try to say things like the louvin have its capacity of about thirty million barrels a day for the first forty years of its existence and now all the sudden nano type production can expand and you know opec is really being called on to expand its ability to produce oil on a day to day basis and that is really what's changed in this environment bill it's very interesting when we started talking about in this program about the demise of opec but it listening to robert here it looks like opec has actually a new lease on life so it's really could be the other way around. well i thought i mean i think you've got to look at the reserves at the end of the day i mean there's no we know there's no shortage of oil in the ground the issue seems to be these countries ability to to invest and develop all for the future as we stand at current that currently there are there are two main opec countries that

seem to be in a position to do that one is saudi arabia and they have a fantastic track record of achieving that and the other one is iraq iraq has undoubtedly phenomenal oil reserves the real issue with iraq is political stability and whether we're going to see this country bring on the supplies that it's penciled in in the timeframe that it has i think most serious all around with a little bit skeptical about that at the moment but but the real question is you know those entries are in fact you know the big problem is outside of the you know we see production in the north sea declining we see production in all opec countries basically for which really gives opec control over their marginal supply of oil i gentlemen i want to ask all of you want to same question if i'm going to germany first and we are living in an era of high oil that will stay high oil do stay with high prices because of that the demand i met

a dynamic dynamic that has been mentioned already in this program. i think long term we're going higher ground out i think we're going to get some short term blips up and down i don't think we i mean i think the market's going to struggle a little bit at current levels but i think i look long term down the market i only see higher prices i think the man is going to continue to grow and if prices rise slowly that the man will continue to grow i mean we've got countries like china that are just really in the embryonic stages of its growth right now and it's already. the second largest consumer of oil in the world bill what do you think about that because there's always there's the worry and mr obama is up for reelection and gas prices are always an issue for americans. when you look at opec and high oil prices can afford to see the u.s. in the end they say the european euro zone going to double dip and still sell their oil because you still have the chinese and the indians i mean that's the dynamic has changed so much even if the west goes into recession you can still have high

oil prices. yeah i know i know it's we're in a totally counter-intuitive world these those the fact is that you know i think that there are members of opec who are very concerned about the danger of double dip and they. and the other gulf to see partners were to get more oil out there to keep prices under control i mean in terms of your original question whether we see your prices growing i i i think that there is a reasonable risk now that we could see some softness in the short term clearly related to the danger of you know growing unemployment you know unemployment is stubbornly high and in o.e.c.d. economies we've got solvent that issues we've got a raft of political risk as well so so i do think that there are problems but longer term i completely agree i mean the supply side is constrained and if we continue to see growth in china which is really really phenomenal double digit growth in all the months and then compounded by incredibly strong demand from the

middle east and from latin america and south africa and other countries where the model is growing above trend certainly way above we see the levels then i think we're going to struggle to find those barrels but you think about that robert i mean it's used to be we always had to think of the demanded to be the rich west countries needed god i mean if they if they can't get their economies on track i mean they need it will all just flow to anyone they want can afford to buy it in like we all agreed in the program having a little bit of extra cash everybody wants now so yeah i mean you might want to be generous but you know you have to it is so you know it is there is no should out there in. yeah it's a world market china and india are now big players but you've got to remember where in absolute terms o.e.c.d. oil demand is actually declining slightly and u.s. demand is basically flat so it's all coming from china and india but even those countries are not immune from recessionary impacts in that if the u.s.

goes into recession china and india will be back sporting goods and demanding well so well put in a longer term it's absolutely the case that yes we're going to get a breeze brief respite from high oil prices every now and then but in the long term things are looking. well there. what do you think the instability in the arab world right now with the the arab awakening is people are calling it i mean how much is that going to start putting pressure on prices as well because i mean do you think if we have you know saudi arabia is not doesn't have a whole lot of friends and eight that the number of friends it has in the region does make lining ok relatively and they seem to be want to be going on a certain path and i think we ought agree they're not going to reform ok look what's happened in bahrain how much is the arab uprising the impact of oil prices at this point. i think to the extent that it it funnels over to saudi arabia it

could be huge i think if saudi arabia can continue to isolate itself and co wait and and its u.a.e. and bahrain and continue to isolate itself from from the start you know or awakening then i think it's going to have a minimal impact but at the end of the day if it does spread the saudi arabia and saudi arabia loses control then i think you know all bets are off and we're going to scrape yes i mean with the other day saudis are producing eight point nine million barrels of oil a day of the three point six million barrels a day of oil that's available in surplus capacity three point three of it is in saudi arabia so the end of the day it's a saudi game and if anything impacts negatively saudi foreign oil it's just a huge huge issue for the consuming world what do you think about the i don't mean this is where another political angle comes in i mean we we see a lot of criticism of saudi arabia and i'm going to mention bahrain and what not i mean this is a region that is getting more and more volatile and it doesn't look like

pro-democracy forces are winning the day at the end of at the end of all of this here is this more sectarianism mean how much how concerned should the global consumer be as this thing continues down that it's inevitable path to change. well i think much is made of the inevitable part of change but i think if anything. the wave of changes kind of run up against a bit of a big wall at the moment i think part of the reason that we saw prices. slip back a few weeks ago was was the the immediate appearance of throw towards saudi arabia seem to faded and i think if you look at i don't think there's any more international thought for getting involved in situations like they have in libya and syria is the proof of that. but the other thing to say is that you know so far the countries that have been affected by this process of this process this political uprising if you like have been not really minor all producers would have

with the exception of libya and i think that it is significant i do think you have to count up the outages and and wisc risk risk it properly but at the end of the day are we about to see us or kuwait or saudi arabia fall over i think it's pretty unlikely to be honest. robert what do you think about their political to the political risk in your opinion when we look at the real growth is going to have. you know what one of the things i think about is sure in the short term there could be some instability but if if you replace the saudi regime if you replace the kuwaiti regime unless you're going to really replace it with a very radical kind of non market oriented government whatever government takes over is going to have to make sure its people are happy and it's going to have to earn oil revenues and it's if anything changes in these countries are more likely

to generate lower oil prices in the medium to longer term than higher oil prices because of the way that governments were both in the western world and in well producing countries is by basically keeping their citizens economically happy and the way to do that and a lot of these countries is pump oil and sell it ok everybody wants to make money i think gentlemen we've run out of time many thanks so my guest today in london and in boston and thanks to our viewers for watching us here on our keith see you next time remember cross-talk will. take you. to think you can.

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