August 2011, No. 61

OPEC Exclusive

OPEC Emphasis on More Cooperation and Interaction

Massoud Mirkazemi, the (former) Iranian minister of petroleum addressed a ceremony marking the 50^th anniversary of the Organization of Petroleum Exporting Countries in Tehran noting that the first initiative to establish the organization was taken by Iran, Venezuela, Iraq and Saudi Arabia in 1949.

"At that time, international oil majors (called Seven Sisters) set price of oil in a unilateral process until 1963 when eight more countries joined OPEC. The organization is currently accounting for 80 percent of the world’s energy resources and more than 40 percent of international markets and is very influential in setting market trends," he added.

The (former) Iranian oil minister stated that the organization has gone through many ups and downs since its inception. He added, "Some countries are not willing for this organization to live and have even claimed that to stabilize international markets, OPEC should raise output. Meanwhile, instability stems from taxes that the same countries have levied on oil products they import."

The (former) minister stated that cooperation between producers and consumers is the main issue which should be taken onboard now. He continued, "Given the current conditions in international markets, unilateral approaches will not be beneficial and sovereignty of all producing companies should be respected."

He added that economic recession since 2007 has been a major challenge facing OPEC as countries have lost part of their purchasing power for hydrocarbon products.

Mirkazemi mentioned distribution of international instruments without financial support by Western countries as a root cause of international crisis, saying, "Secure investment for OPEC members can be only assured through security of demand which is currently lacking due to conditions created by Western countries."

He stated that if the real oil price was compared to a few years ago, the current price would seem quite logical.

"A review of 40 years of oil price and comparing it with increased price of production equipment will prove that purchasing power of producing countries has fallen. As a result, producing and consuming countries should cooperate and follow financial policies which will benefit both parties," he added.

The (former) minister continued by saying that some oil producing companies have unfortunately used their surplus revenues to invest in international markets and have created economic bubbles. When those bubbles are gone, Western countries will plunder their natural riches.

Mirkazemi stated that other producing countries save their surplus revenues in dollars. "However, as dollar depreciates, so does their savings. Fortunately, Iran has reduced dependence of its oil transactions on dollars."

The (former) Iranian minister of petroleum noted that taxes levied by major oil consuming countries (Group 7) exceed revenues of 12 producing companies and added that some Western economists maintain that OPEC should increase its output to help end the economic crisis.

Referring to speculation in international markets, the (former) Iranian minister of petroleum hoped that international economy will find ways to protect economic interests of both producers and consumers, so that, oil producing companies will be able to make their own economic plans.

Mirkazemi said pressure on OPEC members to reduce oil price without proportionate measures on the part of consumer countries will not benefit economic stability in international market.