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Friedman And OPEC
Thomas Friedman wrote a cynical commentary against OPEC, the highlight of which was an advice he gave to President George Bush, inviting him to impose a one-dollar tax on every oil barrel in the U.S. Friedman argues that this tax would reduce oil consumption and weaken OPEC, thus constituting a form of punishment. It would also ensure revenues for the U.S. administration, instead of OPEC. But his advice is a one-way road for the U.S. to get rid of President Bush. The American people are entirely dependent on the car as a means of transportation, and it would be impossible to deprive American citizens, whether in Los Angeles, Seattle or any other city, from their cars, considering that there are no alternative public means of transportation as developed as there are in Europe. Besides New York, where the use of the subway is almost generalized, the majority of Americans rely on their cars, enjoying low-priced fuel with a much lower tax rate than the rest of the world. Friedman's suggestion of imposing a one-dollar tax on fuel, to be spent on the reconstruction of Iraq, would represent a blow to the U.S. economy as well as an unfaltering recipe for having Bush fail in securing a second term.
As for OPEC, which is always complaining about Europe's raising taxes on oil, it never wished to be the one to benefit, as Friedman claims. In fact, OPEC is against such policy because it makes consumers believe that the price of oil is high, while the real reason for its increase are added taxes.
In this respect, the expert on oil affairs Pierre Terzian, who heads the magazine Petrostrategy, drew a comparison between France's revenues from its oil sales in 1999, which reached 53 billion dollars - knowing that it is a country with a medium consumption rate compared to Japan for example, and the revenues of Saudi Arabia, the largest oil exporter within OPEC, which stood at around 42 billion dollars in 1999 when the oil price was at a low point of 17.75 dollars per barrel. In 1999, France's revenues were three times those of Iran, which stood at 11 billion dollars, knowing that Iran is one of OPEC's major members. As for OPEC's decision to lower its production to 900,000 barrels per day, it wasn't taken in a bid to raise the price of gasoline in the U.S., as Friedman claimed, but rather it was taken as a practical and peaceful decision, based on the international oil market situation. OPEC doesn't want the prices to drop or increase in a way that would negatively affect the international economy, as OPEC's officials are all well aware that a slower development of the international economy would bear a negative consequence on the oil consumption and the demand for OPEC oil.
OPEC lowered its production level in a bid to administrate the market and preserve an equilibrium, which means neither flooding it nor making it become a scarce product. Maintaining the oil market stability isn't just words; it is a practical policy that has been adopted by the major oil-producing countries for years, especially during the last three years when the war on Iraq came to show that the market wouldn't have any shortage despite the lack of Iraqi oil. The recent decision to lower OPEC's production rate was to prevent the prices from dropping to below the line of 22 dollars per barrel, as the Iraqi exports have resumed to the level of 900,000 barrels per day. At the same time, the world reserves started being refilled during the last quarter of the year, which is contrary to a regular season, and this brought a fear that speculators would start meddling with prices in the future through the use of oil reserves.
OPEC has become a wise and practical organization, and its ministers enjoy a long-standing experience in the sector of oil, and they know exactly where their national interest lies. They realize that maintaining the price between 22 and 28 dollars per barrel will not affect the international economy, and represents fair and equitable revenues for all. The first Riyadh Forum that gathered producers and consumers showed that the price of 25 dollars per barrel is acceptable for OPEC and for U.S. Energy Minister then, Bill Richardson. OPEC is a responsible organization, and isn't under the control of the U.S. administration, as it is claimed. As a matter of fact, the administration was opposed to the last decision to lower the production rate, and its decision is based first and foremost on OPEC's members national interests and on the international interest.
If Friedman were honest with himself, he would have included in his commentary what he says in private, namely that the decision-maker of Saudi Arabia's oil policy is a responsible, nationalist minister, who is extremely cautious on implementing the general principles of Saudi's policy, in a methodical and professional way, always based on the stability of prices and of the international market. http://english.daralhayat.com/OPED/10-2003/Article-20031008-1b82dd32-c0a8-01ed-003c-37f4c321c23f/story.html