Copyright 2000 The Washington Post
The Washington
Post
June 22, 2000, Thursday, Final Edition
SECTION: A SECTION; Pg. A16
LENGTH: 921 words
HEADLINE:
OPEC Set To Boost Output of Crude Oil; Gas Prices in U.S.
Unlikely to Fall Soon
BYLINE: William Drozdiak ,
Washington Post Foreign Service
DATELINE: VIENNA, June
21
BODY:
OPEC ministers agreed to a modest
increase in crude oil production tonight, but experts said the boost is too
small to offer much relief from surging gasoline prices in the United States as
Americans prepare to hit the road for summer vacations.
With U.S.
gasoline inventories at their lowest levels in many years and refineries
struggling to keep up with rising demand, the extra crude oil
supplies are not expected to reach the United States until the peak summer
driving season is over. As a result, fuel prices, which reached a national
average of $ 1.69 a gallon for regular unleaded at self-serve pumps this week,
are likely to remain high despite the agreement by the Organization of Petroleum
Exporting Countries.
The decision by the 11 oil-producing nations to
raise output by 3 percent, or 708,000 barrels a day, came after Saudi Arabia and
Iran, the two biggest exporters, set aside their perennial bickering about price
and production levels in a rare show of cooperation. The accord was designed to
lower crude oil costs below $ 30 a barrel, which many analysts describe as a
critical political threshold that often triggers high-level intervention from
governments of consumer countries. But initial market reaction was skeptical.
Oil prices rose slightly and showed no sign of falling substantially below the $
30 level.
At their last meeting in March, OPEC ministers boosted output
by 1.7 million barrels a day and promised to consider further production hikes
if petroleum prices broke through a preferred range of $ 22 to $ 28 a barrel.
Prices in the past week have soared to $ 34 a barrel before easing back in
response to the anticipated increase in crude oil supplies.
Saudi
Arabia's oil minister, Ali Nuaimi, has said his country is determined to use its
leverage as the only OPEC member with significant excess capacity--estimated as
high as 3 million to 4 million barrels a day--to calibrate production so oil
prices do not exceed $ 28 a barrel.
"Our goal is a stable market in
terms of supply and demand and a moderate oil price that is acceptable to
consumers, generates good money for producers and does not harm world economic
growth," Nuaimi said.
The swift accord reached during a 90-minute
meeting at OPEC headquarters here demonstrated Saudi Arabia's renewed dominance
over the organization's policies. With other OPEC states pumping as much oil as
they can, price hawks such as Libya and Algeria--which want to get as high a
price for their oil as the market can bear--could put up only token opposition
to Saudi wishes.
Iran also has clashed frequently with Saudi Arabia in
the past about what it sees as Saudi kowtowing to American pleas for more oil,
but Tehran now appears to have embarked on a new phase of detente with Riyadh.
Iranian President Mohammed Khatemi has declared that he wants to cooperate with
Saudi Arabia in the hope of relaxing political tensions in the Persian Gulf and
defusing their traditional rivalry in the oil-rich region.
In contrast
to the March session, when Energy Secretary Bill Richardson toured the Persian
Gulf region just before the meeting in an arm-twisting exercise that antagonized
his hosts, the United States kept a discreet profile this time. But it
nevertheless sent a clear political message expressing its desire to see the
Saudis open the taps to produce an extra million barrels a day, according to
U.S. and Saudi officials.
"Whenever the price of oil goes above $ 30 a
barrel, the decision process becomes one that is based on politics rather than
economics," said a senior Saudi official. "At that point, the oil issue gets the
full attention of the [Saudi] royal palace and the White House."
The
Clinton administration said in Washington that it welcomes OPEC's decision and
expressed hope the additional supplies will ease prices for American motorists,
the Reuters news agency reported.
"We're pleased that they listened to
the arguments that we made," Richardson told reporters before testifying at a
closed-door hearing of the Senate Intelligence Committee.
"I am pleased
with this figure and hopefully, with additional oil from non-OPEC countries that
might be announced soon, that this will be good news for the American consumer.
We think it's a positive step toward bringing stability to oil markets, to world
economic growth," he said.
After Richardson spoke, major non-OPEC oil
producer Mexico said it was raising its oil exports by 75,000 barrels per day,
Reuters reported.
While OPEC states produce about 35 percent of the 77
million barrels a day now reaching the market, analysts say their production
decision may have less influence than usual at this time over the surging
gasoline prices in the United States. The International Energy Agency has
estimated that despite the economic recovery in Asia and the continuing boom in
the United States, the supply of oil now exceeds demand by nearly 3 million
barrels a day. The agency says there is plenty of crude oil available and the
flow of OPEC supplies has been sufficient to keep prices in check.
Many
experts say the recent spike in automobile fuel costs is due to the impact of
new environmental laws designed to improve the combustion cycle through
additives that reduce air pollution. Despite the suggestions of price gouging
from Vice President Gore and other politicians, the higher purification costs to
the refineries have been passed along in time-honored tradition to the consumer
through higher prices at the pump.
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