Oil price: Why OPEC won’t cut production – David-West

Oil price: Why OPEC won’t cut production – David-West

AMIDST declining price of crude in the global market, a former minister of Petro­leum Resources, Prof.Tam David-West, has declared that despite intense pressure, the oil cartel-Organisation of Petroleum Exporting Countries (OPEC) will not cut down crude production quota.

OPEC is an association of oil-producing countries which was established in Baghdad Iraq,in 1961. It generates about 45 percent of the world’s total crude oil production, and more than 20 percent of the world’s natural gas production.

In an exclusive interview with Daily Sun, David-West said those calling for crude oil production cut by OPEC in order to shore up crude oil price, lack the understanding and dynamics of the work­ings of the oil industry.

He explained that activi­ties of non-OPEC member countries, which included: Brazil, Russia, Mexico, Nor­way and a host of others, will make the idea of oil produc­tion cut an impossible task because production statistics are shrouded in secrecy.

‘‘You cannot control what you don’t have information about. These countries, be­ing non-OPEC members are difficult to regulate. If they give you a particular volume of their daily production, go back and verify their claims; it can never be the same,’’ he said. The former oil minister argued that if OPEC decided to cut production by about 20percent among OPEC member countries, the same percentage, if not more, would find its way back into the oil market as a result of the massive production of non-OPEC members.

In this instance, he said the motive behind the oil cut would have been defeated, because non-OPEC mem­ber countries and even some OPEC members would not agree to crude oil cut.

‘‘Is it a country like Iran that just got its sanction lifted after several years that will agree to oil produc­tion cut? They are eager to make up for lost years and will do everything to ensure that they push their oil to the international market at what­ever cost,’’ he noted.

David-West equally took a swipe at the managers of Nigeria’s oil sector, saying there was no need for panic over the slide in crude oil price. He maintained that, it has happened before and was not an entirtely new de­velopment.

Rather, he said manag­ers of the economy should come up with measures to benefit from low crude oil price, rather than lament and create a panicky situation for the country.

“When I was the oil min­ister in 1984, crude oil sold for $30 a barrel, just as it is selling for now. But, we were able to manage the economy even with that. We came up with policies to cushion the effect. At that time, Nigeria never import­ed a single litre of oil, rather we exported.

“Now that oil price is low is the best time for Nige­ria to increase its reserve and do more of exploration because it is cheaper now. When that is done, we can reap the benefits on the lon­ger term. But, to sit down and begin to lament about low oil price is a last ap­proach. I don’t subscribe to that,’’ he said.