Ecuador Urges OPEC to be Wary of Provoking Alternative Energy

Sources:
Financial Times - Ecuador Calls on OPEC to Protect Future Demand
El Comercio (Quito) - Ecuador Anuncia Imparcialidad en la OPEP


Ecuador’s oil minister has warned OPEC that rising oil prices might threaten future demand of oil, as consumers turn to alternative energy sources that are increasingly being developed to offset the price spike of crude oil. Minister Chiriboga gave the warning at a time of record-high oil prices, reaching $94 a barrel this week. Chiriboga stated that the greatest challenge facing OPEC is to maintain an equilibrium in the price of oil and a competitive position in relation to alternative energy sources.

Ecuador has recently re-joined OPEC after several decades outside of the organization. Although a small producer relative to the largest-producing oil countries in the group – such as Saudi Arabia, Iran, and Venezuela – Chiriboga expressed hope that Ecuador could be a mediating country between oil price “hawks” like Venezuela and Iran, and more moderate members like Saudi Arabia and United Arab Emirates. Chiriboga’s remarks occur just ahead of an OPEC head of state summit, which is one of only several such summits in the history of OPEC. The summit presents the opportunity for member countries to develop long-term strategies and a response to the high prices.

Oil closed around $93 yesterday at the close of the New York Stock Exchange, down from its high of $94 earlier. The oil closed just down from its peak price because of the rising value of the US dollar as well as a fall in the NYSE.

However, the slight fall in prices masks the overall trend of rising oil prices in the past few years. Since the beginning of the year, oil prices have risen more than 50%, and rose 18% just in the month of October. Many experts have noted the dollar’s continuing weakness as a cause of the rising price of oil.

Discussion:

1. How should those working for renewable fuels and “green” energy sources respond to OPEC’s interest in the continued future demand for oil?

2. Who do higher oil prices primarily benefit?