SPIEGEL INTERVIEW with OPEC's Secretary-General 'International Oil Companies Are the Real Dinosaurs'

In an exlusive SPIEGEL interview, OPEC Secretary-General Abdalla Salem el-Badri discusses the dangers of a further dramatic rise in the oil price, the failures of multinational oil companies and considerations within the cartel of oil-exporting nations to trade in euros rather than dollars.


An oil field complex in Shaybah in eastern Saudi Arabia: "We at OPEC don't want extremes, prices that are too high or too low. What we do want is a stable price."
DPA

An oil field complex in Shaybah in eastern Saudi Arabia: "We at OPEC don't want extremes, prices that are too high or too low. What we do want is a stable price."

SPIEGEL: Mr. Secretary-General, the price of a barrel of crude oil hit the $100 mark for the first time in early January. While consumers are burdened with high prices, the producers are busy filling their pockets. Did you celebrate at OPEC on that day?

El-Badri: No, why should we? We are interested in reasonable prices. We want stability. Besides, the average price per barrel was $69 last year. Only a very small amount of oil was traded at above $100, and only for a very short time. It is a gamble. It was a single dealer who miscalculated and lost money as a result.

SPIEGEL: Now you are downplaying a dramatic development that has the whole world deeply concerned. The price of oil has quadrupled in four years, and last year it rose by an alarming 57 percent. Experts at the German Institute for Economic Research believe that a price increase to $200 within 10 years is likely. Do you disagree?

El-Badri : The oil price should be based primarily on supply and demand. If that's the case, an increase to $200 is highly unlikely. But when other factors play a key role, like speculators or geopolitical factors ...

SPIEGEL: ... in other words wars in the producing countries, or the sort of unrest that's currently happening in Nigeria ...

El-Badri : ... that is your interpretation. We also have the drop in the dollar value against the euro as well as the final bottlenecks in US oil refining. Then you may see any price.

SPIEGEL: Many experts already believe that the current level is dangerous and fear a worldwide recession. During his visit to Riyadh, US President George W. Bush reprimanded OPEC and called upon the organization to do something about the current record high prices. Expensive gasoline, he said, is hitting "American families where it hurts."

El-Badri : If there is a recession, it won't be because of the oil price. It will be caused by the subprime mortgage crisis in the United States and other financial market problems.

SPIEGEL: It's certainly an important factor, next to oil. Nevertheless, OPEC has been accused of driving up prices. You don't think that $100 for a barrel of oil hurts OPEC's reputation?

OPEC Secretary-General Abdalla Salem el-Badri at his office in Vienna: "The world is a better place because of OPEC."
REUTERS

OPEC Secretary-General Abdalla Salem el-Badri at his office in Vienna: "The world is a better place because of OPEC."

El-Badri : Why should it hurt our reputation? I have a proposal: We at OPEC give you our member states' oil revenues from our exports and you give us, in return, the money from the taxes you assess on oil products. That would be a fair deal, right?

SPIEGEL: We can't do that. But we're also not entirely sure that the finance ministers of the major consumer nations would even be interested in that sort of a deal.

El-Badri : You see? For many of our member nations, petroleum is the only source of revenue, and that's why we need a fair price.

SPIEGEL: What does that mean? Two and a half years ago, we spoke with Adnan Shihab-Eldin, your predecessor as head of OPEC. He mentioned a price range of $50 to $60. You yourself said in November that there was no evidence to suggest that the important psychological threshold of $100 would be reached.

El-Badri : I have no concrete sense of target prices, not even of a specific range. We at OPEC don't want extremes, prices that are too high or too low. What we do want is a stable price. This would benefit the producers and the consumers. But, as I said, the market determines that.

SPIEGEL: A market over which you don't have decisive influence? Has OPEC lost so much power, OPEC, the feared organization that dictated prices in the 1970s and 1980s and has even used oil as a political weapon -- during the Yom Kippur War, for example?

El-Badri : We only dictated things for a short period in our history. Those days are long gone. The countries that belong to OPEC currently supply about 40 percent of the petroleum consumed in the world. One cannot exactly say that we truly control the market.

SPIEGEL: But OPEC can exert important influence by cutting back or expanding production volume.

El-Badri : That's true, and we do this as we see fit. Beginning in 2004, we increased production by close to 5 million barrels per day by the end of 2006. Then we reduced production by 1.7 million barrels when we felt that the price was too low. It was a very good decision as far as OPEC is concerned.

SPIEGEL: Some experts doubt that OPEC can even expand production volume to a significant degree anymore. These specialists say that Saudi Arabia, for example -- the world's only oil superpower -- is already putting too much pressure on its oil fields today, and that the reserves are generally smaller than was previously assumed.

El-Badri : Don't worry, we still have capacity. We are currently able to increase production by 3.5 million barrels. And we have also invested up to 2012 in new projects at a total cost of $150 billion, which will give us additional capacity of 6 million barrels in four years. However, we have to know how high the demand for oil will be in the future, so that we can plan our investments accordingly.

Graphic: Oil Price
DER SPIEGEL

Graphic: Oil Price

SPIEGEL: You cannot deny that the reserves are finite. Have we already seen "peak oil" -- the maximum level of petroleum production that can be reached before reserves will inevitably begin to shrink?

El-Badri : No, I don't think so. I also don't believe that we will reach this point in the near future.

SPIEGEL: Experts outside of OPEC have a less optimistic view of our energy future.

El-Badri : Perhaps. But I believe that even your grandchildren will still have enough fossil fuel. There will be an end to the oil, for sure. But I'm convinced it will not be in the next 100 years.

SPIEGEL: Even a study published on behalf of OPEC concludes that, by as early as 2024, your cartel may no longer be able to fully meet customers' demands and deliver as much oil as they need.

El-Badri : This is not our own study, it does not reflect the official OPEC view. I am convinced that its conclusions are wrong. There is enough oil. And there are enough discovered reserves. Our real problem lies in the correct assessment of demand. We would like to know how fast it is growing.

SPIEGEL: That depends on many factors, including energy conservation in the industrialized nations and the thirst for energy in major emerging economies like China and India. Do you have a clear idea of what's going on there?

El-Badri : I have visited China and spoken with the political leadership there. We are in talks with the EU and I am going to visit Japan. The most important thing for us is dialogue. The individual countries do not provide us with exact demand figures for the future, but at least they give us some indication of how much oil will be needed.

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