Milk and soda water are costlier than oil: Oapec

Arab oil producers have gone out of their way to respond to persistent consumers' complaints that their crude is expensive, saying a barrel of their oil is much cheaper than a barrel of milk or soda water.

Despite the surge in crude prices to historical high levels of close to $150 (Dh551) a barrel in late July last year, they remained far below 0.1 per cent of a barrel of premium perfume, said the Organisation of Arab Petroleum Exporting Countries (Oapec) in a study about oil prices and production.

At present levels of about $70 a barrel, the price of crude oil is nearly $55 below the price of a barrel of milk in industrial countries and less than a fifth of the price of a barrel of soda water, said the Kuwait-based group, which controls about 670 billion barrels of oil and pumps more than 20 million bpd of crude.

While oil prices have sharply fluctuated over the past decades, the prices of milk, soda water, coffee and other commodities have steadily grown, said Oapec, which groups 10 Arab hydrocarbon exporters.

Oil prices shot above milk prices in late July 2008, when they hit an historic high level of about $147 a barrel. But they dipped below milk prices in the following weeks and continued their rapid decline because of the global financial turmoil.

In December, oil prices were as low as $35, below a third of the $125 price of a barrel of milk and less than 10 per cent of the soda water price of $400 a barrel.

"The price of a barrel of crude oil reached at its best a level which is slightly higher than the price of a barrel of milk. But it then dipped far below that price and is now below the prices of milk, soda water and many other commodities," said the report.

While the price of home-made coffee of about $50 a barrel is now less than that of oil, the price of a barrel of coffee offered at a coffee shop could be as high as 40 times the current price of a barrel of oil, said Oapec.

"The price of a barrel of coffee at a coffee shop is now about $3,000," it said.

"Even a barrel of ketchup is more expensive than oil as it is priced now at about $380 a barrel. The price of a barrel of Evian water of about $2,960 is also nearly 42 times the price of a barrel of crude oil. Low oil prices are more underscored when compared to the price of premium perfumes, which could reach more than $1,200,000 a barrel, nearly 1,700 times the price of oil."

Oapec pumps more than 20 million barrels of oil per day, fetching it a record $618 billion in 2008, when crude prices averaged a record $95 a barrel. The price collapse prompted Opec to slash crude supplies by 4.2 million bpd, of which nearly 2.6 million bpd were trimmed by Arab producers, mainly the three Gulf oil heavyweights – Saudi Arabia, the UAE and Kuwait.

Major consumers have often criticised Arabs and other crude producers over their attempts to push up prices. In turn, producers argue that they need relatively high prices to fund their domestic development on the grounds oil exports provide the bulk of their income.

Given their massive proven oil resources, Gulf countries have the lowest production costs in the world, standing at about $3 per barrel in Saudi Arabia and an average $4 in Kuwait and Iraq.

Oapec put costs at between $4 and $5 in the UAE, Iran, Algeria and Venezuela and as high as $8-$12 in the US, Canada and the North Sea.

 

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