Oil price benchmarks in international trade: urging Gulf producers to be more proactive in creating a market for their crude

Journal article

Speaking at the inaugural session of the World Future Energy Summit in Abu Dhabi, Chinese Prime Minister Wen Jiabao, was quoted as saying: ‘To stabilise the oil and natural gas market, we may consider establishing, under the G20 framework, a global energy market governance mechanism that involves energy suppliers, consumers and transit countries.’ (…) ‘We need to formulate …binding international rules through consultation and dialogue, and set up multilateral coordination mechanisms covering forecast and early warning, price coordination, financial regulation and emergency response.’ (emphasis added)

On the same day, the Saudi Minister of Petroleum, Ali Naimi in an interview with CNN said: ‘Our wish and hope is we can stabilise this oil price and keep it at a level around $100 a barrel. If we were able as producers and consumers to average $100 I think the world economy would be in better shape.’ A few days later, the recently appointed Governor of SAMA – Saudi Arabia’s central bank – said that the Kingdom would offer excess oil production capacity if needed to balance oil prices, and that he expected prices to stay stable.

It is then evident that the issue of price ‘stability’ remains very much a concern of major importers and exporters alike – notwithstanding that, relatively speaking, prices have been rather stable since the spring of 2009. This should be no surprise, because relative stability is explained by contingent circumstances, and may not last long. A structurally unstable market may well display temporary stability.

Authors: Luciani, G

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Oxford Institute for Energy Studies
• Journal: Oxford Energy Forum
• Volume: 87
• Pages: 24-25
• Publication date: 2012-02-01
• Edition: Publisher's version
• ISSN: 0959-7727
• Language: English
• Keywords: OIES