Oil prices climbed above $100 per barrel Wednesday after members of the Organization of Petroleum Exporting Countries (OPEC) failed to reach agreement on production quotas. Analysts had expected OPEC nations to boost production in a bid to lower oil prices and ease pressure on the global economy. But as Mil Arcega reports, OPEC countries say speculation, not tight supplies are to blame for rising oil prices.
With crude prices up more than 25 percent since January, financial experts believed an agreement by OPEC's 12 member countries was imminent.
Stephan Schulmeister at the Austrian Institute of Economic Research predicted a 60 percent likelihood that the oil producing cartel would vote to boost production. "Why? Because the economic news from the United States and European Union became more negative, or pessimistic," he said.
Under pressure from consumer nations to bring down oil prices, Saudi Arabia proposed boosting output by one and a half million barrels per day.
But OPEC Secretary General Abdullah Al-Badri says discussions broke down Wednesday after only five hours. "The reason why we were unable to reach a decision is because everybody has their own data," he said.
The International Energy Agency in Paris says it is disappointed by OPEC's failure to reach consensus. But some member countries, including Venezuela and Iran, insisted the cartel's output of roughly 26 million barrels per day is more than adequate to meet global demand.
In the end, AL-Badri says there were simply too many open questions. "Because of the inflation, because of the unemployment, because of the sovereign debts because of the manufacturing decline, so there is a lot of uncertainty, which makes the decision very difficult to take," he said.
Some experts say the break down shows that some OPEC countries are more interested in cashing in on high oil prices than stabilizing energy markets.
Alexander Poegl at JBC Energy says the ongoing turmoil in some Arab countries has only added to the uncertainty. "The Arab Spring is causing increased spending of the individual countries. This means of course that individual countries have a strained budget which in turn means that countries exporting oil or natural resources are looking to have a high oil price in order to increase revenue," he said.
Some OPEC members warn continuing high oil prices could ultimately backfire on producers -- especially if rising prices prompt consumers to sharply conserve energy or switch to alternative sources of fuel.