A Washington-based think tank sympathetic to Arab causes, the Middle East Policy Council, held a seminar Friday on Capitol Hill examining the current state of the oil market and likely future developments.
Oil industry experts say the petroleum markets are in a transitional phase in which it is difficult to make accurate cost predictions. Most suggested that with global demand rising rapidly, mainly because of fast growth in China and India, this could be the beginning of a 1970s style oil boom, in which prices rise and stay high.
World oil prices have more than doubled in the past 18 months, a development which confounded predictions that the end of the Iraq war and a resumption of Iraqi exports would lead in lower prices.
James Placke of the Boston-based Cambridge Energy Resources, says Saudi Arabia has been boosting production since April in an effort to drive the world oil price back below 40 dollars per barrel.
"That's adding a large amount of oil to the market with the purpose of trying to contain the price spike that we've experienced [where prices recently reached $47]. And I think the Saudi objective is to get the price back below $40," he said. "That has to do with Saudi interests, not with a relationship to the United States or any other consumer."
Mr. Placke says Saudi Arabia wants the oil price to remain low enough so that consuming nations do not seek alternatives to oil as their principal source of energy. Saudi Arabia has the world's largest oil reserves and is the largest oil exporter.
The sharp rise in oil prices has created a windfall of 200 billion dollars in extra revenues this year for Middle East oil exporters. Chas Freeman, a former U.S. ambassador to Saudi Arabia and the head of the Policy Council, says that the additional revenue diminishes the Bush administration's leverage in promoting democratic reform in the mostly authoritarian Arab oil producing countries.
Mr. Placke of Cambridge Associates says the additional revenue has produced a similar windfall for Russia, the world's second biggest oil exporter. He says Russia is orienting its future exports towards Asia, in part because it lacks modern facilities at the ice-free northern port of Murmansk, the most direct route to the large U.S. market.
[modernization of] "Murmansk doesn't look like it is going to happen, so Russian crude can't be imported competitively, in general terms, into the American market. Russia seems to be much more oriented towards China and Japan as major long-term purchasers," he said.
The experts agreed that current prices are not high enough to trigger a global recession. For that to happen, they say, prices would have to rise to as much as 70 dollars per barrel.