A report by the French Government analyses the volatility of the oil price and proposes the definition of an effective European oil strategy along with a stronger cooperation of Europe with the Southern Countries
When OPEC controlled the price of crude oil , all the Western opinion protested violently . Eventually, OPEC receded, and accepted to price its oil on the future market. But ,then, volatility ensued. The price moved not only because of the changes in the demand and supply balance of crude oil, but also, in a much stronger way , because of the changes in the demand and supply of risk capital. Speculation peaks reached not long ago the 100 dollar barrel, but those who complained soon realised that were accusing the very basic structure of the capitalist economy, that is, financial speculation, and the protests subsided quite fast.
The problem has .however, been considered relevant enough to be studied in detail, among others, by the French Government , who created a “Working Group on Volatility of crude oil price” which has published in February a large, and quite complete document titled “Report du Group de Travail sur la Volatilite’ de Prix du Petrole, sous la presidence de Jean-Marie Chevalier”. It was prepared by Ministerial people , with almost no contact with oil companies , and without consulting OPEC; its conclusions have been written having in mind France’s Foreign Policy.
The Rapport clearly states that the volatility of the oil price comes from a “complex interaction” between physical and financial factors ; and goes on saying that the reforms proposed up to now to reduce the latter are difficult to apply and are severely disliked by the financial world . The risk of a serious crisis is therefore permanent. The study concludes with three recommendations: a stronger dialog between oil producers and consumers ; a stricter regulation of both the financial and the physical market; the definition of an effective European oil strategy.
The study goes on to state that , given the difficulties of the present situation, in which we need to produce more energy for the poorer countries , but we also need to reduce emissions, France should launch a new “oil diplomacy” with the immediate objective to publish more transparent oil data by creating a larger and more effective data bank on such matters; and to stimulate the international initiatives of the International Forum for Energy (a body that up to now has not fully justified its existence). On the European level, the study talks about preparing “European oil scenarios”; paying a greater attention to the working of the financial market; promoting the “harmonisation” among countries of the fiscal take on oil products, and, in general, a stronger cohesion of the various European countries. Finally, it recommends a stronger cooperation of Europe with the Southern Countries, who try to reduce both their dependence from oil, and the damage created by volatility of its price. Those points do not seem really new, but it has been the first time in recent years that an European Government tries to define a strategy in such a delicate area, and chooses to do so by publishing a quite prestigious research paper.