With oil prices setting yet another record in early May, rising above $120 a barrel, grumbles within consuming nations about Opec’s laissez-faire approach grow louder by the day.
The world’s biggest gas guzzler, the US, has been the most vocal critic of the Middle East-controlled cartel, and it is expected that President George Bush will again ask Saudi Arabia for a production boost during his visit to the kingdom on 16 May.
Sympathy for the cartel seems to evaporate by the day. The US’ Energy Information Administration estimates earnings from the sale of Opec crude will top $1 trillion in 2008, a 57 per cent jump from last year’s revenues.
For its part, Opec blames the fall in the US dollar and the rise in speculative trades from hedge funds for much of the increase in prices.
But the cartel’s unwillingness to either reassess its greenback links or act on the rapid ascent of speculators and hedge funds as a new controlling market force is winning it few friends.
On the supply side, analysts argue Opec faces a more tricky equation. Few countries in the group, with the exception of Saudi Arabia, have the ability to increase supplies at the snap of a finger, and no guarantee exists that prices will fall even if supply is raised.
For now, consuming countries will, in the absence of cheaper alternatives, continue to buy Opec’s oil. But the longer the cartel thumbs its nose at legitimate price concerns raised within the market, the more the feeling grows that Opec’s apathy may make the organisation increasingly redundant as chief oil market stabiliser.