Oil producers blame high prices on speculation

Caracas, 22 Sep 2000 (IPS) - The currently soaring prices of crude are not only a result of conditions of supply and demand, but of speculative practices as well, the president of Venezuela’s state-owned oil company Petroleos de Venezuela (PDVSA), Hector Ciavaldini, said Friday.

Despite the fact that the Organisation of Petroleum Exporting Countries (OPEC) has put enough crude on the market, “prices are not dropping, because we are looking at a situation that does not only involve the question of supply and demand,” Ciavaldini told foreign correspondents in Caracas.

The official, a close associate of Venezuelan President Hugo Chavez, said that speculation was playing a decisive role in keeping prices high on the eve of the second gathering of OPEC leaders in the organisation’s 40-year history, to be held in Caracas next week.

“We look favourably on the United States’ attempt to put additional barrels on the market,” said Ciavaldini, referring to the possibility of that country dipping into its strategic reserves in a bid to drive down prices.

But meanwhile, prices remain high, despite the OPEC decision to boost output by an additional 800,000 barrels a day as of Oct 1, which will bring the organisation’s total production to 26.2 million barrels a day.

OPEC regained its decisive influence over the market in March 1999, when prices had hit their lowest point in two decades. At that time, the organisation’s 11 member countries, as well as key non-members like Mexico, agreed on production cutbacks to shore up the rock-bottom prices.

By March 2000, prices had climbed 200 percent. And since then, although the organisation has agreed three times to boost output, they have remained high.

The OPEC reference basket of seven crudes rose 68 cents this week, to Friday’s 32.47 dollars a barrel, up from last week’s 31.79 dollars, the Venezuelan Energy Ministry reported.

Northsea Brent was fetching 33.02 dollars Friday (0.52 cents down from last week’s price), West Texas Intermediate sold at 35.69 dollars (1.42 dollars up), while Venezuela’s heavy crude was selling at 31.13 dollars, 81 cents up from last week’s closing price.

Venezuelan Energy Minister Ali Rodriguez, the current president of OPEC, said the organisation “has done everything up to it to bring prices” down to within the OPEC price target band of 22-28 dollars, considered suitable to both exporters and importers.

But the voices of alarm grew even louder this week when the price of West Texas Intermediate climbed above the 37-dollar mark—a level not seen since the 1991 Gulf War.

U.S. Vice-President and Democratic Party presidential candidate Al Gore suggested to President Bill Clinton the release of the country’s 571 million barrels of strategic reserves in lots of five million barrels, in order to ward off an energy crisis during the coming northern hemisphere winter.

The question is being closely followed by Europe, where high fuel prices have triggered a wave of protests in recent weeks.

Ciavaldini maintained that the high fuel prices paid by consumers were more a result of the taxes levied by the governments of importer countries than of OPEC production quotas.

In the European Union, taxes account for 50 to 76 percent of the price paid by consumers for every litre of gasoline, according to studies.

The president of the PDVSA said there was a consensus between Venezuela and its fellow OPEC members that a “stable price” of around 25 dollars was needed, in order to enable “all economies to do their planning.”

Ciavaldini confirmed, meanwhile, that both Saudi Arabia and Venezuela have the capacity to expand exports if OPEC agrees it is necessary.

Ali said it was feasible that another 500,000 barrels would be placed on the market if prices were still high by Nov 12, when OPEC plans to hold an extraordinary ministerial meeting.

Although the second summit of OPEC, to take place here next Tuesday to Thursday, does not plan to discuss oil prices, the ever- present backdrop for the gathering will be the industrialised world’s heavy lobbying to get exporters to further increase output in order to bring prices down.

The meeting could serve as a decisive catalyst for a dialogue between importers and exporters, Ciavaldini added.-SUNS4747

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