Oil Crisis Threatens Economy--Mexico

Mexico’s energy secretary, Franciso Labastida Ochoa, warned Wednesday that a petroleum “price crisis” could threaten the international financial system by making it difficult for troubled oil producers to meet foreign debt payments.

The comments came just two days after Mexico lowered the price of its lower-quality heavy crude oil by $1.50 a barrel to $24 and just two weeks before OPEC ministers will meet to consider deteriorating prices in world oil markets.

Earlier, Venezuela’s energy minister, Arturo Hernandez Grisanti, responding to the Mexican price cut, said his country would try to hold prices steady until OPEC’s July 5 meeting. But Hernandez Grisanti also said that if OPEC does not change prices, Venezuela “can always do it on her own.”

Venezuela is a founding member of the Organization of Petroleum Exporting Countries. Mexico is not an OPEC member but generally has followed the organization’s pricing and production policies and has sent representatives to OPEC meetings. It often coordinates pricing of its heavy oil with Venezuela.

At a news conference Wednesday with Hernandez Grisanti, Labastida Ochoa told reporters that “Mexico wants to continue defending the petroleum market.”

“A price crisis would put the international financial system in particularly difficult conditions by making it difficult for our countries to meet their financial commitments,” he said.

Asked why Mexico had decided to lower prices at this time, Labastida Ochoa replied: “Prices in the market have dropped.”

But Labastida Ochoa also said that heavy grades of crude oil, such as the Maya blend that was lowered in price, are not covered by OPEC’s official prices. Mexico has not reduced the price of its light Isthmus oil.

Sixty percent of Mexico’s exports are heavy crudes. About 70% of Venezuela’s oil exports are heavy grades of crude oil.

The Mexican minister arrived in Caracas on Tuesday night and met for 1 1/2 hours Wednesday morning with President Jaime Lusinchi at La Casona, the official residence.

Labastida Ochoa said he had brought a message from Mexican President Miguel de la Madrid expressing his concern about the international oil situation.