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find out what's really happening to the global economy cause a report on. it is here in moscow you with a rundown of the top stories now and this just in the czech republic has pulled out of the u.s. defense missile plan for europe which aims to protect the continent from any potential threat from iran the czech defense minister told reporters that the decision was made out of frustration that his country has a minor role in the project. of furious protest and. the parliament. to vote on a new public in order to secure international. and the leaders of russia

and china joined the central asian counterparts for peace summit focusing on fighting extremism and drugs the president talked afghanistan and iran also attending the tenth anniversary as c.e.o. meeting and. those are the headlines here at odds he up next people of oil and his guests debate whether opec is still relevant in the modern world that's in cross talk coming your way now. to keep. a low in the welcome to cross talk i'm peter lavelle it 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. and.

to 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 he is a founding partner of the energy management institute and in boston we cross to robert kaufman he's director in full professor in the center for energy and environmental studies at boston university ok gentlemen this is cross talk 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 opec's 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 a day there 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 choice

but when iran thwarted 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 due to popular uprisings and sectarian turmoil iran defied saudi arabia's proposal to change production policy that 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 well market already strained by a tighter supply from a bad old libya though the head of opec sought to assure that the market was flush with oil and there was no reason for concern. at this time no.

we have no. options. 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 that current supply did not match the demand and said the country could be looking to tap into his strategic reserves others have sought to assure that in reality the stalemate means little and that opec members are already putting more oil on the market than their agreed quotas perscribe everybody you know pick is cheating and everybody knows that don't listen to what they say but watch what they do. so should the list be dismissed altogether the world has already watched opec weather war between two of its member countries iran and iraq as well as the invasion of kuwait in one nine hundred ninety and one fraught meeting is scarcely enough to disband this half 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. naifeh across our team. if i go to you first in london is opec in crisis because ever since we keep hearing there's no crisis and opec there's no crisis in 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 seven 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 oil to 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 adding 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 sembler saudi arabia can act upon their own instincts is to put more oil to 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 get sanctioned 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 it's had as an organization until which time that we get into a massive downturn in in the need for opec oil and it doesn't look likely until it's very interesting because if you look at the history of opec opec only seems

ever 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. yeah no i think you're absolutely right opec has a much better history of unity when prices of weak and when they need to cut production than when prices edging are when we only 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 were causative to the the financial crisis but the argument clearly is that they're slightly more tolerant of prices than they are low so i think if you look at the history of crises that opec's been through where you had the iran iraq wars in the eighty's you've had 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 but at the end of the day you can be sure that even if it didn't exist it would come into existence because when prices go too low these producers hope. ok and robert if i go do you want one of the interesting things about this particular crisis you know we want to call it that is that a lot of the major producers are looking a break even point now in their break even 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 pay off their power their populations in light of what's going on with the arab spring so is this one of the reasons see that the price issue is they're not so concerned about is it goes up because they really like they 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 up prices 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 many comments of this is just a grudge match between iran and saudi arabia because we can take the political dimension out in and i think most people say the history of opec is that they've usually 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 are 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 its only role here is to act in as an opposite the saudi arabian

yes i think it's politics associated with it and yes i think that the relationship between saudi arabia and the united states is one that probably doesn't favor well with the iranians and several of the other more price works within opec so i think there is some politics here and i think that iran is trying to assert itself by bringing this contingency 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 it can get to really pay off its population witness what happened last spring witness what's happening with the economy and so any rigged 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 a couple of these other countries they have huge investments overseas and if well

prices go too 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 wash for them so really we're in is ation with very different political positions dominick you want to reply and i agree to everything you said but go ahead dominic i mean i really just i let me just say what he said with. ok bill do you want to jump in there. yeah 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 in opec or elsewhere in the middle east north africa but but but i think there was some genuine economic disagreements at this meeting as well i mean i was 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 at a bit of 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 well 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 at the end of the day and everything else has been pretty much assured ok domini is a shortage is there a shortage of oil on the market here because there'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 qualities 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 of the oil there but in general no there's no shortage of oil right now today the whole discussion is basically looking towards the second half of the year and what the previous panel is just mentioned there has been some demand destruction you know the best the best solution to the high price of oil is high prices because we will get some a leicester city of the me and i'm sure that that's a concern all right gentlemen i'm going to jump in here we're going to a short break and after that short break we'll continue our discussion on opec stay with our team.

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free risk free stews types free. download free broadcast quality video for your media projects a free media and on to our teeth on tom. thumb. and if. you want to. welcome back to crossfire computable about true mind you we're talking about opec and high oil prices. come up and. ok robert if i can go to you in boston i mean what a half century old. now and but it is is the oil environment changing more than it was then half a century ago that now because we have new players or relatively new players that

are a very large growing economy something in china and india which really were not part of that dynamic i have century ago i'm getting a high oil prices there's a demand there is this is so high and continue there for for i mean 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 non-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 but yes the go ahead go ahead dominate could be anything i just mean 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 did at the end take us ok well i think we are to the manager of a model no no no no if you mean you're going to bend 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 will of the one hand it's capacity

of about thirty million barrels a day for the first forty years of its existence and now all of a sudden not opec production can expand and now opec is really being called on to expand its ability to produce oil on a date. to day basis and that is really what's changed in this environment bill it's very interesting and we started talking about in this program about the demise of opec but if we're listening to robert here it looks like on opec has actually a new lease on life so it's really could be the other way around well i think i mean i think you 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 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 trial 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 oil analysts little bit skeptical about that at the moment but the real question is you know what those injuries are in the opec you know the big problem is outside of you know we see production in the north sea declining we see production in all opec countries basically fly which really gives opec control over the marginal supply of oil all right gentlemen i want to ask all of you want the same question if i'm going to dominate first are we living in an era of high oil that will stay high oil going to stay with high prices now because of that the demand dynamic dynamic that has been mentioned already in this program. i think long term we're going higher without a doubt 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 if 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 demand 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 well 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. and 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 could still have high oil prices. yeah i know i know it's we're in a totally counter-intuitive world these days the fact is that i think that there

are members of opec you are very concerned about the danger of double dip and they . and the other gulf g.c.c. partners were keen to get more oil out there to keep prices under control i mean in terms of your original question whether we see or prices going up i i think that there is a reasonable risk now that we could see some softness in the short term purely 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 demand and then compounded by incredibly strong demand from the middle east and from latin america and south africa and other countries where

demand is growing above trend certainly way above we see the levels then i think we're going to struggle to find those barrels when you think about that robert i mean it's east to be we always a thing of the demanded the the rich west countries needed better mean if they if they can't get their economies on track i mean they need it the oil will just flow to anyone they want can afford to buy it and like we all agreed in the program having a little bit of extra cash everybody wants that so yeah i mean you might want to be generous but you know you have to be so you know it is there is no should out there and. 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 west goes into recession china and india will be export goods and demanding less oil but

it will 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 up. well they're there they are what do you what do you think with the instability in the arab world right now with the the arab awakening as 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 it's the number of friends it has in the region is declining 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 happening in bahrain how much is the arab uprising the impact 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 they continue to isolate itself from you know our 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 my going to scrape or something because 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 circles capacity three point three of it is in saudi arabia so at the end of the day it's a saudi game and if anything impacts negatively saudi flow in oil it's just a huge huge issue for the consuming world what do you think about that i mean this is where another political angle comes in i mean we we see a lot of criticism of saudi arabia and i get a mention in bahrain and whatnot i mean this is a region that is getting more and more volatile and it doesn't look like pro-democracy forces are winning lead the day at the end at the end of all of this here is just more sectarianism mean how much how concerned should the global

consumer be as this thing continues down to its inevitable path of change. well i think much is made of the inevitable part of change but i think if anything the the 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 immediate appearance of threat toward saudi arabia seem to faded and i think if you look i don't think there's any more international appetite for 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 really minor all producers with the exception of libya and i think that it is significant i do think you have to count up the

outages and wisc sort of 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 what it what's the political risk in your opinion when we look at the real world i says go ahead. 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 quatre 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 the way that governments work both in the western world and in oil

producing countries is by basically keeping their citizens economically happy in the way to do that and a lot of these countries pump oil and sell it ok everybody wants to make money and i think gentlemen we've run out of time many thanks some i guess a day in london and in boston and thanks to our viewers for watching us here on our team see you next time remember cross talk to. you.

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