The dominant production organization is not to blame for the rising inflation, according to the newly appointed OPEC Secretary-General Haitham Al Ghais, who blamed persistent underinvestment in the oil and gas sector on Wednesday.
“OPEC is not behind this price increase,” Al Ghais spoke with Hadley Gamble of CNBC.
“There are other factors beyond OPEC that are really behind the spike we have seen in gas [and] in oil. And again, I think in a nutshell, for me, it is underinvestment — chronic underinvestment,” he added.
“This is the harsh reality that people have to wake up to and policymakers have to wake up to. Once that is realized I think then we can start to think of a solution here. And the solution is very clear. OPEC has a solution: invest, invest, invest,” Al Ghais said.
Al Ghais of Kuwait was chosen earlier this year to serve as the secretary general of OPEC for a three-year period. Mohammad Barkindo, a veteran of the Nigerian oil sector who passed away at age 63 last month just days before he was set to leave the organization, is succeeded by him.
Al Ghais’ remarks follow the surprise announcement at the OPEC+ meeting on August 3 that only 100,000 barrels per day would be added starting next month, which shocked market players. OPEC+ is a significant producer group made up of OPEC and non-OPEC partners.
The committee advised moving forward with “great caution” because to the “severely limited availability of excess capacity.”
It was perceived as a jab at US President Joe Biden, who had urged OPEC to increase crude production to support the US and the world economy during a visit to OPEC leader Saudi Arabia last month.
The following gathering of OPEC and non-OPEC producers is planned for September 5.
The alliance between OPEC and Russia is “solid”
When asked if OPEC, which accounts for over 40% of global oil production, should be held accountable for rising inflation-causing energy costs, Al Ghais responded, “No, absolutely not. I mean it’s all relative, that’s number one.”
“Number two is OPEC is doing its part. We have been increasing production in line with what we see and a gradual mechanism that has been very transparent … We are doing everything we can to bring the market back to balance but there are economic factors that are really beyond OPEC’s control,” he added.
Recent weeks have seen a decline in oil prices due to increasing worries about a worldwide recession and a deteriorating demand picture.
On Wednesday morning, benchmark Brent crude futures were trading at $92 per barrel, down roughly 0.4%, while West Texas Intermediate futures were at $86.25 per barrel, down more than 0.3%.
Regarding the energy alliance’s relationships with non-OPEC leader Russia, Al Ghais claimed that the two parties have a “solid” working relationship and that the group consistently tries to keep politics apart from its goals of market stabilization.
“First of all, if you look at history, if I may, such challenges are not new to OPEC and the OPEC history,” Al Ghais said.
“We try always in our meetings to separate the politics and the political aspects from what we do in terms of managing the market balance and in terms of what we do as OPEC+, I think the methodology is clear,” he continued.
“Russia’s leadership in supporting the declaration of cooperation has been clear since day one, since 2017. The relationship is solid in terms of managing the market.”
When asked if this implies that he has confidence in Russia, Al Ghais responded: “Yes.”
Who exactly is Al Ghais?
Al Ghais has a 30-year career in the international oil business and is a well-known OPEC official.
He formerly served as a key part of Kuwait’s delegation to OPEC meetings and has recently provided advice on oil market developments to six Kuwaiti oil ministers.
Al Ghais was the governor of Kuwait for OPEC from 2017 to 2021 and a participant in the committee’s internal audit.