UAE CONCERNS ABOUT "NOPEC" AND LAW SUITS

C O N F I D E N T I A L ABU DHABI 001162

SIPDIS

SIPDIS

DEPT FOR NEA/ARP, EEB/ESC/IEC/EPC

E.O. 12958: DECL: 07/12/2017
TAGS: EPET ENRG EINV AE
SUBJECT: UAE CONCERNS ABOUT "NOPEC" AND LAW SUITS

REF: STATE 88197

Classified By: Ambassador Michele J. Sison for reasons 1.4 (b & d).


1. (C) On July 10, Econchief met with Ministry of Energy
Director of Economic Affairs Hamdan Al-Akbari to discuss
NOPEC legislation and oil market issues. Econchief explained
administration opposition to "NOPEC," but also stressed the
context underlying Congressional consideration of the
legislation. The context includes near-record petroleum
prices, statements by key oil producers, and increasing
demand growth without matching supply growth.


2. (C) Al-Akbari said that he thought that, although supply
and demand were largely in balance, prices were too high.
High oil prices increased inflationary pressures on the UAE
economy. In addition, the UAE was a major international
investor. Lower oil prices, he noted, would likely improve
both markets and economies in consuming countries, from which
the UAE would also benefit. Al-Akbari stated his view that
geopolitical risks, speculation, and U.S. refinery
constraints all contributed to high prices. Econchief noted
U.S. U.S. Federal Trade Commission estimates that 85% of the
variability in the cost of gasoline results from changes in
the price of crude. Al-Akbari agreed with econchief's
contention that oil producers' actions and statements could
have an impact on the market and promised to convey that
message to UAE Minister of Energy Al-Hamili. On July 11,
Al-Hamili publicly stated that OPEC would be ready to raise
production if necessary, though he also argued that the
market was adequately supplied.


3. (C) Al-Akbari expressed his hope that "NOPEC" legislation
would not pass and his concern that it would have a negative
impact on OPEC investments in the U.S. as well as future
energy cooperation. He noted current law suits against
Aramco and the Venezuelan national oil company and asked
whether the USG could or would intervene in the cases.
Al-Akbari also noted that both consumers and producers shared
a responsibility for dialogue. Although consuming nations
worried about security of supply, producer nations worried
about security of demand. It was expensive for producers to
invest in increasing capacity, he noted. Producers might be
reluctant to invest in capacity that would never be used. He
conceded econchief's point that most analysts projected that
oil and gas would likely remain a major source of energy for
a considerable period of time.
SISON