Tuesday, October 7, 2008

Blabbermouth Shukri Ghanem

Few months ago an American business reporter who covers the oil business told me, and I am quoting, " Shukri Ghanem is OPEC's media whore. When the more serious oil ministers of Saudi Arabia, Iran or Kuwait are not willing to talk to the press during OPEC meetings, we all count on Shukri to jump to the microphone whenever we want". That of course explains why you see so many quotes by him among the wholesalers of news like AP, Reuters, and AFP.

This Analysis below by Foreign Reports - http://www.foreignreports.com , one of the worlds' oldest and most prestigious political analysis firms specializing in the oil business, demonstrates not only Shukri's leaky mouth, but also the contradictory nature of his positions and his lack of credibility.

This bulletin is only sent to the firm's clients, but I reproduce here with permission for your benefits.



October 7, 2008

Comments today by Libyan oil policy chief Shokri Ghanem that OPEC “has to do something” to prevent a further deterioration in oil prices reflect his volatile nature, not a sober assessment of overall market conditions.

At an OPEC meeting in March 2007, Ghanem expressed concerns about the possible impact rising prices might have on demand. “We are happy with the [OPEC] basket between $55 and $60 a barrel,” he told reporters. He acknowledged in an interview that prices could surge to levels that OPEC is uncomfortable with. “I wouldn't be surprised if [the price of oil] goes up to $80 a barrel this year” if something goes wrong, he said. He added that he and others in OPEC would begin to fret about negative repercussions when oil prices rise too high. “Beyond $65 or $70 a barrel, we are worried,” he insisted.

In his comments today, Ghanem warned that OPEC might hold an emergency meeting. “If this volatility continues, OPEC will have to do something,” he said. “We cannot allow the prices to deteriorate....we have to do something. We may sit down together before December. We are watching the market. It is a dangerous situation .If OPEC cannot do it together, individual countries can do it by themselves by cutting their production.”

Just Another Commodity

Throughout much of this year, Ghanem insisted that OPEC had no power to affect prices. “There’s nothing OPEC should do, nor do we have much capacity to do anything. What’s driving oil is out of our hands,” he said at the beginning of January.

“OPEC no longer controls the price,” he declared on May 8. “Oil is just another commodity traded on the futures market, which is speculative by nature. OPEC is simply watching the futures exchanges in London and New York.”

“This Meeting is Going Nowhere”

When Saudi Arabia convened an energy meeting in Jeddah on June 21, Ghanem said the meeting wouldn’t achieve anything and was ill-prepared and that increases in oil output wouldn’t resolve soaring oil prices. “This meeting is going nowhere,” he told reporters when he arrived in Jeddah. “We thank Saudi Arabia for inviting us, but we think the meeting is not going to achieve anything. I don’t think the meeting is very important….It is not well prepared for. We’re coming to discuss a very important subject, supposedly, and expected to get any important decision in three hours. That’s impossible.”

When prices did begin to ease in mid-July, Ghanem predicted that they would soon rebound. “We are noticing it is down sharply, but so far we still think that it is only temporary, it will rebound,” he said on July 30.

After OPEC’s meeting last month, he predicted that production would decrease because “the ceiling is less than the actual production.”

“It will shore up the market and help stop the deterioration of the price,” he said on September 11.

Going With the Flow

The Saudis appear much more willing to let prices follow their course, rather than abruptly changing their views whenever prices change. With so many hundreds of billions of federal money being injected into financial rescue plans, it may be easy to lose sight of the stimulus that lower oil and other commodity prices may provide. When President Bush signed the Economic Stimulus Act in mid-February, there were some hopes that the $152 billion package of tax rebates and other incentives would jump start the then-“lagging” U.S. economy. The stimulus package was equal to 1% of GDP.

In Q1, WTI prices averaged $97.80. In Q2 and Q3, prices averaged $121, or $23.20 higher. On an annualized basis, the higher cost of imported crude and products during those two quarters would have resulted in the transfer of around two-thirds of the stimulus package, or $100 billion, to foreign oil producers, together with the transfer of another $70 billion to domestic oil producers. Both domestic and foreign oil producers do plough some of their revenues back into the U.S. economy, so it is not as if the money spent on oil products went into a black hole. But higher prices did take money out of consumers’ pockets.

If WTI prices in Q4 fall to an average of, say $80, or $41 lower than the preceding two quarters, the annualized extra “stimulus” from lower crude prices would amount to around $180 billion.

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