OPEC and Global Warming

OPEC supports fight against global warming
The Yomiuri Shimbun

In an apparent attempt not to be singled out as "bad guys" in the international community, the Organization of Petroleum Exporting Countries expressed its shared concern over global warming and pledged to ensure stable oil supplies in the long run in the Riyadh Declaration issued at its summit meeting.

OPEC usually makes decisions on such important matters as crude oil production ceilings at general meetings of oil ministers held several times a year. Mid- and long-term issues are supposed to be discussed at summit meetings of leaders of member states, and the latest meeting was only the third of its kind held since OPEC was established in 1960.

As a group, OPEC has taken the most passive stance on anti-global warming efforts. Expressing its concerns that reduction in oil consumption would shake the foundations of its members' national economies, the group has resisted efforts to reduce carbon dioxide emissions.

But in the declaration, the group clearly showed its support for efforts to halt global warming, saying it would support international challenges on global environmental issues and cooperate in forestation projects and other efforts.

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Money for research


Saudi Arabia, which hosted the summit meeting of OPEC member nations, announced it would provide 300 million dollars in research funds, saying that such funds would be allocated for research and development of technologies such as those to contain CO2 underground after separating greenhouse gasses from exhaust released at thermal power plants.

As the Intergovernmental Panel on Climate Change said that global warming was mainly due to human-induced causes, the reduction of CO2 emissions became a task to be achieved by all people around the world. OPEC therefore likely judged that it would not be in its best interests if it continued to be reluctant to support measures to fight the problem.

Next year will be the start of the first five years for achieving numerical targets in reducing CO2 emissions under the Kyoto Protocol. The shift in stance by OPEC may drive the United States and China, which oppose regulations to reduce emissions, to face even harder situations.

As the price of crude oil nears 100 dollars per barrel, consumer nations had some hope the OPEC summit meeting would make a decision to increase output.

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Speculation distorting market


The largest factor in the the recent rise in oil prices is the inflow of speculative funds into the oil futures market. It is not the case yet that the balance of supply and demand on global oil markets has collapsed. Even so, if OPEC shifts to increase oil outputs, it would effectively weaken the impetus behind speculative transactions.

The declaration underlined that OPEC was well aware that stable oil supply is essential for sustained economic growth in consumer nations. But regarding the more imminent issue of rising oil prices, the declaration only referred to short-term price volatility being harmful to both producers and consumers. OPEC thus did not shift to raise outputs. At a general meeting in December, the group should agree to increase production.

Due to economic growth in such nations as China and India, global oil demand is sure to increase over the next few years, but it cannot be said that development of new oil fields to meet increased future demand is going well.

Oil producing nations have obtained sufficient development funds with high oil prices. But they remain reluctant to raise production levels for fear that prices might go down with increased output. It is regrettable that the declaration did not directly touch on this problem.


(From The Yomiuri Shimbun, Nov. 20, 2007)

(Nov. 20, 2007)