U.S. Appeal for Oil Output Boost Gets a Muted Response

Energy Secretary Bill Richardson received no promises and little sympathy from Mexico on Saturday as he began a trip to lobby oil-producing countries to lift production limits that have sent heating oil prices soaring in the United States.

Mexican officials said they share Richardson’s concern about inflation but would respect a gentlemen’s agreement with other producers not to increase output before April 1.

Richardson told a news conference after the meeting that U.S. officials were worried about production levels and the low level of oil inventories.

“The high price of oil could contribute to inflation . . . and diminish growth in the world economy,” Richardson said. But he was quick to add that it was unlikely to cause a recession “like in the 1970s or ‘80s.”

Richardson warned that U.S. inflation could hurt Mexico’s own economy. Almost 85% of Mexican exports go to the United States. Mexico also depends on U.S. tourism and money sent home by workers in the north.

Mexican Energy Secretary Luis Tellez said he wanted “high, stable and profitable prices, but ones that don’t hurt the world economy.”

Both Richardson and Tellez were walking a tightrope: Richardson didn’t want to set off a nationalist backlash here by seeming to threaten Mexico, and Tellez was ridiculed in the local press last week for suggesting that oil prices should come down to about $25 a barrel. The price of oil stabilized Friday at slightly under $30 a barrel.

Tellez’s statements were ill-received in a country where poverty is widespread and where the government relies on oil for about a third of government income.

“I absolutely don’t think prices are too high. Mexico has had prices of as much as $36 per barrel in the past,” said opposition legislator Sergio Osorio, president of the House Energy Committee, who also took part in the meeting.

“This is a question of national sovereignty because Mexico’s own interests come first,” Osorio said.

Oil-producing countries agreed to cut output by 5.2 million barrels per day last March after prices plummeted to below $10 per barrel.

Some U.S. politicians have urged President Clinton to release crude oil from strategic reserves to the market, something Richardson said he opposes and which Osorio said would only temporarily depress prices.

Neither Richardson nor Tellez would set a figure on how much they want production increased or what they think a reasonable price would be. Richardson said that was for the producing countries to decide in meetings next month.

It appears likely that producer nations may agree to boost output by about 1.7 million barrels per day, based on recent statements by Venezuelan and Saudi officials.

Richardson is scheduled to continue on to Venezuela, Saudi Arabia, Kuwait and Norway.