OPEC President Vows to Fight Volatile Oil Prices
Germanico Pinto, Ecuador’s minister of natural non-renewable resources and current president of OPEC, has called for reduced oil speculation in pursuit of less volatile prices. (image: laht.com)
Bloomberg reported on Wednesday that another high-profile international figure has pledged to fight excessive oil speculation, which many believe contributes to volatile prices. OPEC President Germanico Pinto of Ecuador laid out what he sees as the negative impact of volatile prices on OPEC and the oil industry: “volatility produces difficulties in the markets and in defining a long-term strategy for public investment in the oil industry.”
When making long-term plans for oil exploration projects, oil companies rely on a projected crude price to predict future revenues and budget projects accordingly. Unpredictable prices can place such projects in a state of limbo, adding to uncertainty about future supply levels. Furthermore, as Pinto noted, the inability to predict the profitability of oil companies makes them less attractive to public investors.
Pinto’s statement represents a cause in which the interests of oil companies and consumers are aligned. Just as huge oil companies need steady prices to plan their budgets, so too do American consumers of heating oil and gasoline. But while the OPEC president’s dedication to reducing oil speculation and price volatility may draw additional attention to that goal, he wields little if any power to push toward it. His public statement gives additional industry support to the CFTC’s push to curb speculation on US commodities markets, but his position as the head of an international business organization affords him no official influence over national or international policy.
So the battle for tighter controls over commodities speculation in pursuit of steadier oil prices has a new and vocal ally. Whether heating oil users and gasoline buyers in the US will see any benefit in the near future is still unclear, but they can take some comfort in knowing that, at the very least, when OPEC talks, the world listens.
