On June 8, the Organization of Petroleum Exporting Companies will hold a meeting in Vienna. The meeting may be chaired by Mahmoud Ahmadinejad, the president of Iran, a prospect that has some people in the West nervous. Today, the International Energy Agency issued a statement urging oil producers to make more oil available, lest prices balloon out of control.
"Additional increases in prices at this stage of the economic cycle risk derailing the global economic recovery," the IEA statement reads, "and are neither in the interest of producing nor of consuming countries." Since oil demand is typically highest from May to August, "there is a clear, urgent need for additional supplies" in the near future. The Guardian points out that the statement is "clearly designed to put pressure" on OPEC, and Reuters notes that it's unusual to hear from IEA at all; the agency usually doesn't comment on matters like this. "It is quite rare that the IEA goes out directly to give suggestions to OPEC," said Christin Tuxen, an analyst at Danske Markets.
So the IEA's taking a special step here. But it's hard to say whether it will work. Ahmadinejad is a wild card, and at least one OPEC nation, Saudi Arabia, has compelling reasons not to make more oil available--it needs oil revenue to fund its military and domestic welfare programs, according to a report from JCB Energy. Meanwhile, it's not clear who will even represent Libya at the meeting. The country's oil minister, Shukri Ghanem, may or may not have defected, and the rebels fighting Muammar Qaddafi have submitted a request to represent Libya in his absence.
In other words, it's hard to predict what will happen on June 8, or whether the global supply of oil will end up increasing at all. Meanwhile, oil prices remain high--around $99 a barrel as of today, which is down from the $115/barrel high point of last month, but still well above the May 2010 average of $68 a barrel. Middle Eastern unrest has kept prices high all year. And as CNN puts it, succinctly, "the runup in oil prices has translated into higher prices for gasoline, which dragged on consumer spending and put a damper on U.S. economic activity during the first quarter."
Generally speaking, when households are spending more on gas, they're spending less on everything else--which makes it harder for a sluggish economy to gain momentum. (This isn't always the case, but it works as a rule of thumb.) Even if high gas prices don't necessarily take a bite out of corporate profits, they still put a hurt on consumers. So what happens in Vienna next month could have real consequences for people the world over.