Italian Prime Minister Proposes Oil-Consuming Countries' Cartel to Rival OPEC... Feasibility Uncertain

Mario Draghi, Prime Minister of Italy [Photo by EPA Yonhap News]

[Asia Economy Reporter Park Byung-hee] Italian Prime Minister Mario Draghi has proposed the establishment of a cartel of oil-consuming countries, according to major foreign media reports on the 12th (local time). The idea is to create a counterforce to the Organization of the Petroleum Exporting Countries (OPEC), but there are uncertainties about whether it can be actually implemented.

Prime Minister Draghi expressed his thoughts on the oil-consuming countries cartel during a meeting with reporters in Washington after a summit with U.S. President Joe Biden.

Draghi met with President Biden at the White House on the 10th, and the two leaders reportedly discussed the need for reform in the energy market. This is interpreted as a shared recognition that changes are necessary in the energy market due to the surge in crude oil and gas prices following Russia's invasion of Ukraine, which has intensified inflation. Draghi said he talked with President Biden about inflation and that they agreed both the U.S. and Europe are facing difficulties due to rising prices.

Draghi explained that he shared his dissatisfaction with the structure of the global energy market with the president and discussed conventional measures that could limit the rise in oil and gas prices. He said that oil and gas prices are soaring regardless of supply and demand.

Draghi stated that Italy's biggest goal is to suppress gas price increases to avoid financially supporting Russian President Vladimir Putin in continuing the war, and that Europe’s market dominance should be used for this purpose. However, he acknowledged that not everyone within the EU agrees with this idea and that it is uncertain whether such measures will be approved.

As a way to prevent energy price hikes, Draghi mentioned the possibility of persuading OPEC member countries to increase production or for energy-consuming countries to form a cartel. He added that persuading OPEC members should be the first option to consider and that both approaches involve many difficult processes.

President Biden has repeatedly demanded that OPEC increase production, but OPEC has ignored these requests. Therefore, it is believed that Biden sympathized with Draghi’s idea that energy-consuming countries need to unite to strengthen their negotiating power.

Market insiders, citing the example of the International Energy Agency (IEA), believe that the establishment of a cartel of crude oil purchasing countries is unlikely to continue. The IEA was established in response to the 1973 oil export embargo by Middle Eastern countries as a counter to OPEC. However, IEA member countries recently failed to reach an agreement regarding the release of strategic reserves.

Kevin Book, a partner at ClearView Energy Partners, a consulting firm based in Washington, said, "Despite the oil industry’s 160-year history, there still is no buyers’ coalition."

Meanwhile, before Russia invaded Ukraine, Italy depended on Russia for 40% of its gas imports. Currently, Italy is seeking alternatives to reduce its dependence on Russia. In this regard, Roberto Cingolani, Italy’s Minister for Ecological Transition, stated that Italy could stop importing Russian gas by the end of next year.

This content was produced with the assistance of AI translation services.