Exclusive: IEA decision highlights USA-MENA divide
Pipeline Magazine
WEDNESDAY, 29 JUNE 2011
DOMINANT US role in the IEA's suprising move to dump 60 million barrels of oil on the market shows a broadening gap between US policy and some' MENA countries involved in the Arab Spring uprisings, said Kyle McEneaney, head of Ergo's Middle East practice.
"It is important to view the US contribution in light of the Middle East regional political context, where Saudi Arabia has promoted a response to the 'Arab Spring' that runs contrary to US regional policy goals of democracy promotion and increased political openness," McEneaney told Pipeline during an exclusive interview.
In terms of the IEA's move, he said: "The intervention was executed smoothly, and it proved the IEA can make an impact on the market: nearly 4.5 per cent... but ultimately this is a stopgap solution that cannot address the long-term increase in energy demand."
When asked whether the move also points to a broadening divide between the IEA and OPEC, McEneaney said: "OPEC has been critical, and there is more than a little irony in a cartel decrying the IEA's decision as anti-market behavior."
Though he did not expect a long-term fallout between OPEC and consumers, "the IEA decision evinces a frustration at OPEC's failure to respond to increasing oil prices, but at the end of the day OPEC action will be necessary to address sustained demand increases.
"I view the sizeable US contribution [within the IEA oil release] as a an expression of solidarity with other consuming nations, showing both OPEC and key allies that it is willing to intervene to maintain prices at a reasonable level."
McEneaney also alluded to a potential domestic political impact from the IEA move: "For the Obama administration, the price drop, even if temporary, may take some wind out of Republican sails as presidential challengers announce their candidacies.