OPEC’s $1 Trillion Cash Quiets Poor as $100 Oil Fills Coffers

AYESHA DAYA | SEPTEMBER 2011 | SOURCE: Bloomberg

Saudi Arabia will spend $43 billion on its poorer citizens and religious institutions. Kuwaitis are getting free food for a year. Civil servants in Algeria received a 34 percent pay rise. Desert cities in the United Arab Emirates may soon enjoy uninterrupted electricity.

Organization of Petroleum Exporting Countries members are poised to earn an unprecedented $1 trillion this year, according to the U.S. Energy Department, as the group’s benchmark oil measure exceeded $100 a barrel for the longest period ever.

OPEC’s $1 Trillion Cash Quiets Poor as $100 Oil Fills Coffers

They are promising to plow record amounts into public and social programs after pro-democracy movements overthrew rulers in Tunisia, Egypt and Libya and spread to Yemen and Syria.

OPEC Spending Rises

Of OPEC’s 12 members, nine increased 2011 budgets and of the remaining three, only Nigeria amended its budget lower, while the U.A.E. doesn’t disclose its public spending. Nigeria, Africa’s biggest oil producer, set up a $1 billion wealth fund in May split into an infrastructure fund, a future generations fund and a stabilization fund.

Algeria’s cabinet approved a 25 percent budget increase to pay for the salary raise and food subsidies amid protests that have ended 19 years of emergency rule and led to a review of the election law.

OPEC decided against raising oil supplies at its June meeting even as Libya’s conflict curbed exports. Output of about 30 million barrels a day lags behind the 31.3 million barrels the world needs from the region in the third quarter, according to the International Energy Agency.

Half of Saudi Arabia’s 8 percent increase in June production to 9.7 million barrels a day was used in its own power plants as domestic demand reached a record, data from the Paris-based IEA showed.

Cut Production

“Saudi Arabia will cut back after its summer surge,” said Leo Drollas, London-based chief economist at the Centre for Global Energy Studies, the researcher founded by former Saudi Oil Minister Zaki Yamani. “If it doesn’t trim now then prices might lurch downwards on lower demand, and it needs a minimum basket price of $90 for what it wants to do this year.”

Oil in New York has dropped 25 percent since its April 29 high of $113.93 on concern demand will fall as Europe grapples with its debt crisis and unemployment in the U.S. hovers at 9 percent. WTI averaged $92.64 in the past year.

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