VIENNA // The oil price fall has delivered a stimulus to the world economy worth $2 trillion (Dh7.3tn), the head of OPEC said today, calling on Western powers to do more to revive flagging growth. The International Energy Agency had earlier estimated that the 70 per cent fall in oil prices over the last eight months was equivalent to a $1 trillion cash injection for the world. But Abdalla el Badri, the OPEC secretary general, said that was a huge underestimation.
"The IEA is saying it is equal to a stimulus of $1 trillion. I assure you it is more than $2 trillion. I don't know how they did their calculation," he said at a press conference at OPEC headquarters in Vienna. "It should not be only OPEC countries that pay the price. The rich countries who created this mess, they have to take the burden," he added. The 12-member exporters' group backed away from deeper cuts at a policy meeting yesterday following warnings from consumer nations that higher prices could hamper the recovery.
The OPEC head upbraided developed countries both for setting the world on course for global recession and for failing to act fast enough to turn the situation around. "We have not seen any positive results from the countries that created this problem. We've seen a lot of stimulus packages, money paid out to the banks, but every day we see more negative signs," he said. This showed the promised stimulus packages are being delivered slowly, if at all, he added.
Dr el Badri reiterated that 2009 would be extraordinarily difficult, and said this figured large in OPEC's decision to hold off on a further cut to its production ceiling at a meeting. Instead, the group intends to focus on improving compliance with its previously announced pledge to reduce output by 4.2 billion barrels per day. Increasing compliance to at least 93 per cent from the current level of about 80 per cent by the group's next meeting, on May 28, would be considered a success, Dr el Badri said, as 100 per cent compliance "is not technically possible". Only at that point would OPEC decide whether to cut again.
Removing a further 800,000 barrels per day of supply from the market through greater compliance with the group's target production ceiling would not harm the world economy, due to high oil inventories, he said. The US government had repeatedly urged OPEC to hold off on announcing a further production cut, and on Friday, the US president, Barack Obama, had telephoned Saudi Arabia's King Abdullah. But Dr el Badri said the telephone call did not influence the group's decision.
However, the US should not consider OPEC as its enemy, he said, as the oil exporter's group also wants to see the world's economy improve. "In this difficult situation, OPEC will stand up and meet its obligation," he said. Oil prices have fallen about 70 per cent since peaking at $147 a barrel in July. In New York, crude fell roughly 5 per cent following the OPEC decision to about $44 a barrel. tcarlisle@thenational.ae