December 8th, 2011
08:13 PM GMT
Abu Dhabi (CNN) - There is a milestone about to be set which is going largely unnoticed around the world. Oil will average more than $100 a barrel for an entire year for the first time.
Here in the Persian Gulf states, they call it three digit oil. Simply put, that is a number above $100.
Due to advancements in healthcare and people generally living longer, they say 60 years old is the new 40, meaning we are more youthful in age in the 21st century.
Does this apply to the oil market where $100 a barrel is the new $80 - not too hot, not too cold but just right for oil producing countries and consuming nations alike?
That was the position taken by the Secretary General of OPEC, Abdalla Salem El-Badri during an interview on the sidelines of the World Petroleum Congress in Doha, Qatar.
"$100, everyone is comfortable with it; producers are comfortable with it and also consumers are comfortable with it," said El-Badri. Then he added a little twist to the interview suggesting that importing nations are even pleased with the higher price.
"Some of the governments of the consumer nations like this price because they are generating income. They get more income than our member countries."
That is a hot button issue. When oil spiked above $125 a barrel last spring at the height of the Libya uprising when the North African country’s production slowed to a trickle, the counterpart to OPEC, the International Energy Agency, decided to release some 60 million barrels out of their strategic reserves to calm the market.
OPEC and the IEA were pointing fingers at each other about market intervention. OPEC was told it was not doing enough to prevent a price hike and the IEA was accused of price manipulation, the very thing it accuses the production cartel of.
The two organizations are going to great lengths now to smooth over their differences on demand and the level of investment needed to meet the growing level of consumption especially from China and the rest of developing Asia.
According to the IEA, demand will grow by 47 million barrels a day between now and 2035, about 1.5 times more than OPEC produces today. This will require $20 trillion of investment into oil and gas alone.
But there seems to be a silent acknowledgement in Doha that prices will only head higher in the near and medium term, helping finance that level of record investment.
I asked El-Badri: "When we have a recovery in Europe I would imagine we won’t go down in price but up in 2012 that is the likely scenario?" He simply replied: "If there is growth, there will be higher demand."
That is perhaps the most alarming bit of the 2012 and beyond scenario for importing nations.
We have witnessed anaemic growth in the U.S. and Europe, but prices remained well over the century mark all year long.
Add a tepid recovery in the West, with potential sanctions on Iran by the European Union and oil strategists suggest we could be heading much higher at the start of next year.
That is why El-Badri did not hesitate to weigh into the debate over blocking Iran's exports to Europe when I asked for his opinion.
"If you ask for my advice, and nobody asked for my advice, I would say I don't think it is wise to cut this supply to Europe because they (the 27 nations) are facing a lot of difficulty."
The Secretary General and his member countries know that if prices spike higher due to a geo-political or economic shock, then demand could plummet as it did during the banking crisis of 2008, when oil went from $147 all the way down to less than $40 in a period of six months.
OPEC producers will post record revenues of an estimated trillion dollars this year and they don’t want tensions with Iran and the West to spoil the party.
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