Oil Production: it's Like Asking a Tobacco Firm to Invest in Nicotine Patches

Source from:  Carl Mortished, World Business Editor June 23, 2008 06/23/2008

Even as Gordon Brown proposed a "new deal" between oil producers and consumers, the outlook worsened in the dirty market for crude - a short-term world of crises, logjams, turbulence and market speculation. In the Niger delta, an oil pipeline operated by Chevron was blown up yesterday, and an offshore oil platform was attacked by rebels last week. Nigeria, an Opec state, has probably lost a third of production. This wipes out what gain might emerge from King Abdullah's promise of more oil from Saudi Arabia, even assuming that the market wanted his barrels. The truth is that the world doesn't need the extra Saudi crude. It's the wrong sort of oil - too sulphurous and viscous for refiners trying to produce more petrol, diesel and jet fuel. The world wants "light crudes" such as the UK's Brent or Nigeria's Bonny Light, but these are in short supply. Oil is a market; not, as the Prime Minister seems to assume, a game played by politicians. Behind the pomp of Opec's ministerial meetings is a souk in which hard-edged salesmen manoeuvre for commercial advantage and angle for market share. If Mr Brown came to Jedda hoping to make a deal, he appears to have forgotten that, in commercial negotiations, each party must have something to offer. He came with nothing. Instead he suggested that Opec states invest some of their wealth in nuclear power and renewable energy in Britain. In other words, Opec should invest billions in reducing demand for the cartels' only product - a proposal tantamount to asking British American Tobacco to invest in nicotine patches. Enditem