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gold free blog counseling videos for your media projects a free medio gogarty dot com. you can see. the second. hello and 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. the same and. the same. to cross-talk the controversial role of ok today i'm joined by bill found price in london he is the founder. in c.e.o.

of petroleum policy intelligence also in london we have so many charity tele 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 cross talk means cross talk rules are in fact 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 the other speculations about 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 north of chile 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 do had reason production it could really be attributable to. the world braces for saudi arabia to act which it said it would analysts warn that higher crude prices could seriously threaten an oil market already strained by its higher supply from them battled 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 you know the places we have enough should be in the market. will be 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 that current supply did not match the demand and said the country could be looking to tap into its 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 prescribe everybody you know pickens cheating everybody. but watch what they do. so should the list dismissed altogether the world has already watched opec whether war between chilled 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. charney for crosstalk.

ok dominic if i can go to you first in london is ok in crisis because. we keep hearing there's no crisis and opec there's no crisis and ok 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 or less to the market and they basically have 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 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 it's had as an organization until which time that we get into a massive downturn in in the need for a federal and it doesn't look likely until it's very interesting nominee because if you look at the history of opec will take only seems they 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 you know i think you're absolutely right opec has a much better history of unity prices

a week and when they need to cut production than when prices surging oil we just as recently as two thousand and eight just prior to the financial crisis we saw that they lowered prices got away on the upside. there's a reasonable debate about how much oil prices will cause the financial crisis but the argument clearly is that they're slightly more tolerant of viral prices than they are of lows so i think if you look at the history of crises that it's been through where you 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 of the sort of political involvement they have of each other but at the end of the pay you can be sure that even if exist that would come into existence because when prices go too low these producers hurt. ok robert if you want and one of the

interesting things is about this particular crisis you know we want to call it that is that a lot of the major producers are looking at break even points now in their 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 pay off their 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 they're not so concerned about is it goes up because they really i think like the extra cash. well you know who do who doesn't like a little bit extra money could begin. that whole issue of. paying off your population really gets to the heart of the price 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 see the history of opec is they did 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 down that's a whole nother issue but they are the only ones that can these other countries like iran and iran it's only role here is that in as an opposite the saudi arabian yes i think there's politics associated with it and yes 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 and i 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 a couple of these other countries they have huge investments over seas and if will 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 loss for them so really green is asian with very different political positions on ritalin and i agree with everything you said but go ahead i'm an equal i really just i let me just say what he said. 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 i think there was 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 but 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 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 spoke personally 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 it is a big discussion about that is there 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 oil here but in general no there's no shortage we're 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 a 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 stay with already. to a substantial degree and one form or another socialism has spread the shadow of human regimentation over most of the nations that we are. and the shadow is i'm approaching up on. leave early twenty first century

military bases a network of military bases all around the forms of the empire that the united states is trying to build that's astonishing most americans have no idea there are more than a quarter of a million more than two hundred fifty thousand u.s. troops stationed on these bases all around and. we don't have power bases in america we don't have any british base we don't have any korean bases we don't have any french bases or you know we just all american bases in. all bases are fine there are the noises i would northeast of those of all the us at all because they're all bases but for other people it's almost like a cancer here full speed. since the end of world war two the spaces i've been. working here i'm sure provide

a safe and secure environment for everybody. to be questions real thing else to get everything you needed. for. just. the.

k. . street. welcome to cross talk i'm beautiful about true mind you we're talking about opec and high oil prices. ok robert if i go to you in boston i mean why the half century old now and what it is is the oil environment changing more than it was then the half a century ago then now because we have new players or relatively new players that are have very large growing economies i'm thinking of china and india which were really were not part of that dynamic a half century ago i'm getting high oil prices there's demand there is this is so

hot yeah you know continue there for for i mean ad infinitum 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 so existence. no no impact will production was actually increasing to some degree in lockstep with opec production to keep up with raw. two thousand and four there's been no net increase in non opec production and so what's happened is as it will 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 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 dummy could be anything i just really i 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 do you get there and takes us ok right i think we are in the matter of a model no no no no you mean you're going to land it has a 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 i think moving higher and it's capacity of about thirty million barrels a day for the first forty years of its existence and now all of the sudden not opec

production can expand and now 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 of 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 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 or analysts a little bit skeptical about that at the moment but but the real question is you know what those injuries are. you know the big problem is outside of you know we see production in the north sea declining we see production in oil opec countries basically for which really gives opec control over their marginal supply of oil hi 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 to stay with high prices because of the demand i met a 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 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 what do you think about that because there's always there's the worry and mr obama's up through 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 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 that we're in a totally counter-intuitive world these days the fact is that i think there are members of opec who were very concerned about the danger of double dip and they. gathered gulf to see partners were keen to get more oil out there to keep prices

under control i mean in terms of your original question where do we see your prices going 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 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 north is going 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 out robert i mean it's east to

be we always think of the demanded the the rich west countries need if they came here their economies on track i mean they eat it just flowed 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 that so yeah i mean you might want to be generous but you know you have to it's a b.s. and 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 but we see the 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 well so well but in the 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 not well they're there what do you think. 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 only oil prices as well because i mean do you think if we have we you know saudi arabia is not doesn't have a whole lot of friends 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 uprisings impact oil prices at this point. i think to the extent that if it funnels over to saudi arabia it could be huge i think if saudi arabia can continue to isolate itself and co wait and. u.a.e. and bahrain and continue to isolate itself from from the 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 to saudi arabia and

saudi arabia loses control then i think they are well bets are off and we're going to scrape this i mean 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 at 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 that though i 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 are winning the day at the end at the end of all of this here is just more sectarianism mean how much how concerned should be concerned global consumer be as this thing continues down the it's inevitable path of 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 threat toward saudi arabia seems of faded and i think if you look i don't think there's any more international appetite for for getting involved in situations like this 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 with the exception of libya and i think that it is significant i do think you have to count up the the outages and whisk the risk risk it properly but at the end of the day are we about to see you

a your kuwait or saudi arabia fall over i think it's pretty unlikely to be honest. robert what do you think about what the political risk in your opinion when we look at the grocer's going here. 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 the way that governments work 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 say 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 earth keith see you next time remember i was talking. to.

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