Oil ministers warn output may be cut

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Oil ministers warn output may be cut

European turmoil and rising prices give Opec new strength as members gather in Caracas for first summit in 25 years

Special report: the petrol war

Alex Bellos in Caracas Wednesday September 27, 2000

Libya's oil minister yesterday warned that Opec would be forced to cut its oil output if the price of petroleum dropped as a result of a US move to release emergency supplies. As ministers arrived in Caracas for the first Opec summit in 25 years, the Libyan oil minister, Abdullah el-Badri, said: "I hope this decision [by the US] doesn't shrink the price too much and we are forced to cut production."

Algeria's energy and mining minister, Chakib Khelil, also warned: "There is a good chance we will have to [cut output]. There will be declining demand in the second quarter of 2001 and with stocks rising there won't be strong demand for Opec crude."

Opec - which controls two-thirds of world crude exports - has achieved a new relevance amid the greatest oil boom since the 1980s and protests throughout Europe at pump prices.

Although Ali Rodriguez, Venezuela's oil minister and Opec president, believes that prices will stabilise at a "fair" $25 a barrel, the cartel does not agree with the Group of Seven leading industrialised countries, which favour increased production as a solution to consumer pressure, instead of a cut in petrol taxes.

Opec's new-found confidence is a dramatic turnaround from two years ago, when oil prices sank to $10 a barrel and the cartel was mired in bickering over quota busting. Now - thanks in part to Venezuela's ebullient leader, Hugo Chavez - Opec is returning to the influence it wielded in the 1970s and 80s.

Mr Chavez has worked tirelessly to remodel the cartel into a consumer-friendly advocacy group. In August he toured all the Opec countries.

On Monday night, Mr Chavez gave a televised address to the country, full of his typical revolutionary rhetoric, saying that the industrialised world had grown rich on the cheap oil from producing countries.

"This reunion isn't only about oil," he said, referring to the two-day summit which begins today. Opec would also focus on global poverty, foreign debts and unfair terms of trade for developing countries in their search "for a more just world", he said.

Industrialised countries which were flush with cheap oil a few years ago are now demanding that Opec acts to stabilise a gyrating market that has seen oil prices reach 10-year highs and prompted protests in Europe.

Opec's secretary general, Ril wanu Lukman of Nigeria, said cartel members were surprised by the industrialised countries' refusal in Prague to cut oil taxes. Opec views such taxes - along with free market speculators and hindrances in refining - as the real cause of high prices.

Since his election in 1998, Mr Chavez has seized the stage at opportune moments to cajole fellow leaders of developing countries to unite and confront the perils of globalisation. When oil prices fell in 1998, Venezuela plunged into a devastating recession it is still struggling to escape from. Unemployment is officially 15%, while some 80% of its 23m people live in poverty.

Mr Chavez said on Monday that his government was following in the footsteps of the late Juan Pablo Perez Alfonzo, a Venezuelan energy minister who was a founding father of Opec in 1960 and helped break the stranglehold of foreign oil companies on oil-producing countries.

"And now, Opec has arisen again," Mr Chavez said.

http://www.guardianunlimited.co.uk/international/story/0,3604,373760,00.html

-- Martin Thompson (mthom1927@aol.com), September 27, 2000


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