Loathsome OPEC has global transport by the jewels
Sympathy is in short supply as the world’s oil producing nations bicker over the fixing of prices.
At a big German logistics show in Munich last month, an executive from Boeing raised a horrifying prospect. He reckons that if the unrest sweeping North Africa and the Middle East spills over into the major oil producing countries like Saudi Arabia or Iran, the price of oil will reach US$200 a barrel.
This morning it passed the $100 a barrel mark once again and it had nothing to do with unrest. At least, not the kind of unrest involving guns.
No, the disagreements were all verbal at the OPEC meeting in Vienna, although a bloody shootout involving representatives from member countries would have been immensely entertaining. OPEC members Venezuela, Iran, Libya (surprise, surprise), Angola, Ecuador and Algeria gave the middle finger to Saudi Arabia and the other Arab members after they wanted to increase production.
This has raised the chilling prospect of OPEC countries setting whatever prices they want. Hey, wait a minute … that’s what they do anyway.
Yes, everyone’s favourite cartel worries that lunatics like Chavez, Ahmedinajad, Ghadaffi and others will hike prices to levels more ridiculous than OPEC could do as a unified body.
OPEC is right to be worried. If its members break away and start doing their own thing it will be the end of the loathsome body that has fixed prices and held the world’s cojones in a vice grip for decades.
The cartel will be replaced by free market competition, which would be a good thing, right?
Maybe not. I am no expert in the energy business (“You’re telling me,” I hear some of you learned readers comment), but the oil refineries hold the key to the world’s supply of oil. With refining capacity in short supply, once demand passes a certain point the oil prices skyrocket. Or if refineries in the Gulf of Mexico are hit by hurricanes, oil prices skyrocket.
The big oil companies are as much part of the problem as OPEC.
Then there are the traders and speculators who send the oil price soaring or falling for no apparent reason.
The price of fuel has always been a source of bitterness for transport service providers. Sure, shipping companies have to accept whatever operating costs are required to operate, but that doesn’t mean they have to like it.
If crude ever does hit $200 a barrel, one shudders to imagine the size of the bunker fuel surcharges. Bunkers currently comprise more than a third of a ship’s operating costs, and that is with the price around $100 a barrel. A 100 percent increase and everyone may as well close up and go home.
So roll on the alternatives to fossil fuel, or at least provide automatic weapons at OPEC meetings.