Oil producers are delighted that the oil prices have lately been staying firm at $40 level, which is better and 50 percent higher than the oil prices one month ago. All producers have been committed to freezing oil production at January 2016 level. This commitment needs to be transformed into a formal agreement among all OPEC and non-OPEC members, or at least between the two biggest oil producers Saudi Arabia and Russia.
Some producers were making noises in between about their non-willingness to commit to the decision. Some even threatened to sell every barrel of their capacities if all producers did not stick to the decision to freeze production. We need to remind ourselves that no other producers, at this time or in the coming few months, has the capacity to produce more. Therefore, making statements to bully or to threaten to pump more oil does not serve in stabilizing the oil prices. In fact, it will weaken the current smooth process which has increased the oil prices to $40 and can increase it further hopefully.
The suffering of oil producers will not stop because the oil prices should not go above $50 any time soon, as it will cause producers of more expensive oils to return and disrupt the oil market again. Therefore, OPEC in particular should regularly monitor any major deviation so that the oil prices can stabilize, more crude oil can be put in the market, and Saudi Arabia can once again take up its historical role of ‘swing producer’. This should take place soon.
Meanwhile, Kuwait should start thinking seriously about introducing some measures to curb consumption and reduce subsidies particularly for water, electricity and fuel. In this regard, citizens and expatriates should not be discriminated. All should be treated the same. Expatriates and other residents are dwelling in Kuwait to earn a decent living. We need them as much as they need us. Therefore, let us forget about the two-tier pricing system. Let us not discriminate.
Of course, we should welcome the system of paying based on consumption rate, such that the higher the consumption, the higher the bill. This system will definitely be more suitable for expatriates than the citizens, but it will guarantee fairness and equality for all.
Let us not get carried away by the increase in oil prices. We must find ways and means to cut down consumption in every field.
Oil prices should remain firm, provided we do not make some unwanted statements.
By Kamel Al-Harami – Independent Oil Analyst