RIYADH, July 29: Opec is unable to control and influence the global crude markets any further, the International Energy Agency (IEA), the OECD energy watchdog and Opec now concur. Opec President Edmund Daukoru who arrived in Iran on Thursday to discuss how the cartel should deal with high prices told reporters: "It is not the fault of Opec. We have spare capacity and the market is well supplied." IEA head Claude Mandil is also now speaking in the same language.Indeed it is not very often that Opec and the IEA with conflicting and contrasting interests and job descriptions agree on issues. Yet the energy world is such an equaliser that both are coming to virtually the same conclusion about the basic issue afflicting the energy world today -- how to overcome and tame the bull ride in the oil markets and ensure security of supplies as well as security of demand, from the Opec view point.

Opec and its stalwarts, including Saudi Oil Minister Ali al Naimi, have been stressing for considerable period of time now that there is plenty of oil in the market, and in the pipeline, and all talks of shortage and scarcity is wrong -- and rubbish. And that more oil would not help deflate oil prices.

Now even the IEA sees eye to eye with Opec on the issue. Claude Mandil told reporters that the world did not need more oil (now) to moderate record prices. He also stressed the point the Opec stakeholders have been trying to drive home for some time now, that Opec alone was powerless to bring down oil prices without the easing of political tension in the Middle East and other global hot spots. “Nothing can moderate oil prices if there are no improvements in the political situation in the Middle East and all places where there is turmoil,” Mr Mandil was quoted as saying immediately after the G8 summit, in which the Lebanon crisis loomed large. And thus Mr Mandil very much doubted the ability of Opec, and its largest producer Saudi Arabia, to bring the prices down simply by pumping more oil to the market. That won’t work, he almost conceded.

The monthly oil report of the London-based Centre for Global Energy Studies released on July 24 explicitly says so. “Oil price hit new record levels over the past month as violence flared in the Middle East and the market feared for the security of oil supplies, in the event of the conflict spreading to Syria, or possibly Iran. A strong global economy and limited spare capacity to either produce light sweet crude or to upgrade oil into much-needed sulphur free transport fuels have continued to support oil prices and created an environment in which every threat of disruption triggers a rapid and violent price reaction.” Indeed the CGES also does not speak of any non-availability of crude in the market.

In fact crude stocks in the US, the world’s largest consumer, rose by 200,000 barrels last week, the Energy Information Agency of the US revealed. Gasoline supplies also went up by 1.5 million barrels while distillates, being used to make diesel fuel and heating oil, rose by 1.2 million barrels.

According to analysts, the supplies of all the three products are at “above average levels for this time of the year”, especially crude, which is described as “well above the upper end of the average”. Supplies do not seem to be the real problem of the market today.

The IEA chief hence emphasised on more investment in output capacity so as to be better prepared to cope with any supply shocks, as this only could help stabilise the crude market. Indeed he had a point to prove.

Lack of spare capacity has been one of the key drivers of rising prices over the last 12 months. Available significant spare capacity in past has acted as a safety cushion, enabling Opec to increase production in the event of disruption of supplies from an oil producing region. It has been the case in past.During both the Gulf wars, as production from important Opec members, Kuwait and Iraq, came to a halt, Saudi Arabia and other players in the arena used the available spare capacity then to overcome the shortage. Mothballed wells were brought back into production to meet the shortfall. Hence the world did not suffer on that account, despite disruptions. However, with little spare capacity in the pipeline now, global crude markets appear unable to face supply shocks.

And with no dearth of potential hot spots in the oil rich Middle East, the Lebanon issue mainly an addition to the already long list of conflicts in the region, possibilities of shock remain very real.

That’s disturbing the markets, the IEA chief was apparently referring to. And indeed Opec has no power to solve these complex political riddles of the Middle East. And in the absence of any resolution of the regional conflicts, the possibility that the crude markets would cool down considerably over the next few months could be termed as very remote, one could safely argue at this stage.

And Mr Mandil had another very important point to make too. “I don’t think any country could do anything independently. We don’t need more oil. We need more investment in capacity.” And when Mr Mandil stressed on greater cooperation on the issue of energy, one cannot but agree with him.

The G8 also stressed on increased transparency in the entire energy supply chain. That could only be possible in the event of cooperation among the major players in the field. Both the consumers and producers are coming round to the point that coordination between them is need of the hour. All the efforts directed at improving this cooperation and coordination, making things as transparent as possible in the process, appear crucial for the very sustainability of this energy driven civilisation.

However, national priorities and interests often dictate policies in the opposite direction. And it is here that organisations such as the Riyadh-based International Energy Forum Secretariat will have to play an active role. Even the G8 expects of the IEF to continue playing its constructive role in this regard. After all the survival of this energy driven civilisation depends on the success of such efforts. Energy diplomats have thus a major task in hand.