OPEC Summit Ends With Call for New Talks With West
Concluding their first summit in 25 years on a conciliatory note, leaders of the world’s major oil-exporting nations called Thursday for a new dialogue with Western consumer countries to find ways to end oil-price gyrations that have drained Americans’ wallets and set off angry protests in Europe.
Heads of state from the 11-member Organization of Petroleum Exporting Countries, or OPEC, led by Venezuela’s feisty President Hugo Chavez, stridently asserted their right to a fair price for their oil and criticized consumer countries’ high taxes on oil products.
But OPEC’s presidents, sheiks and princes also agreed that the market volatility of the last two years has hurt producers as well as consumers. Saudi Arabia made a conciliatory pledge to ensure market needs for oil are met, saying it is concerned that high prices could undermine world economic growth.
The OPEC appeal for dialogue with Western leaders--as soon as a November energy conference in Saudi Arabia--marked a shift from the embargoes and confrontations of the 1970s toward a quest for common ground. Venezuelan Oil Minister Ali Rodriguez called it a historic maturing of attitudes on both sides.
Nevertheless, it was far from clear whether such a debate could achieve concrete results, not to mention whether Western leaders would even take part in talks that OPEC believes should go far beyond the cost of oil.
“If we do speak with heads of state, we are not just going to talk about oil prices,” Chavez said in a closing news conference. “This is just one small point among an infinite number of issues we need to discuss, such as debt levels, technology transfer, [oil price] speculation and the high taxes applied by consumer countries.”
Still, he noted that French Prime Minister Lionel Jospin had phoned him earlier in the day and they had touched on the theme. “We have been receiving signals, some very diffuse but others more clear, from the industrialized world and we are evaluating these signals,” Chavez added.
He said the talks could even be at head-of-state level with the Group of 8 industrialized nations or the European Union.
Oil prices have been extremely volatile since 1998, when prices plunged to below $10 a barrel, ravaging producer countries’ budgets. Then crude soared toward $40 a barrel in recent weeks before softening. On the friendly words from OPEC, the price of U.S. light crude fell $1.12 on Thursday to end at $30.34 a barrel.
Chavez called the recent price recovery a sign of the “resurrection” of OPEC, whose members provide about 40% of the world’s oil. But he added, implying that oil is still a bargain, that a barrel of Coca-Cola today would cost $78.70 and a barrel of shampoo would be $2,056.
OPEC leaders shrugged off President Clinton’s decision to release 30 million barrels of oil from the U.S. strategic oil stockpile. Nigerian President Olusegun Obasanjo said that amount could be replaced quickly by OPEC producers.
Rodriguez, who is also OPEC’s president, applauded what he called Clinton’s signal that OPEC’s oil-price target of $22 to $28 a barrel is reasonable. That price-band was established in the spring, based on a proposal by Venezuela.
“We in OPEC all think it would be healthy that, for the first time, we establish a consistent dialogue in search of meeting the key interest of all parties, which is to guarantee the stability of the market and the stability of oil prices,” Rodriguez said.
Citizens of several Western European countries have staged blockades in recent weeks to protest high gasoline prices, but their anger is aimed more at their own governments’ punishing taxes on gasoline than at OPEC.
That is consistent with OPEC’s longtime complaint that high consumer prices have less to do with crude prices than with gas taxes that, in Britain’s case, account for 75% of the cost of fuel.
The formal speeches certainly reflected a less confrontational tone. Saudi Crown Prince Abdullah said his country, by far OPEC’s biggest producer at about 8.5 million barrels a day, “is ready whenever needed to produce the quantity required for the stability of the oil market.”
He added: “As much as we were concerned about the plummeting of oil prices two years ago, causing considerable damage to our economies and the world oil industry . . . we are equally concerned now at the increasing level of prices that could have a negative impact on the role of oil worldwide and the prospects of international economic growth.”
The crown prince said an international energy symposium being held in Riyadh, Saudi Arabia, on Nov. 17 will present an opportunity to discuss such issues with industrial nations.
Rodriguez said the extremely low prices of 1998 had contributed to the current spike by discouraging producers from investing more in exploration and drilling.
He said that failing to stabilize the markets now could lead to oversupply by as much as 2 million barrels a day above world demand, “which could provoke a sharp fall in prices and prompt another round of production cuts.”
OPEC agreed this month to raise production by 800,000 barrels a day on Oct. 1 because prices were holding well above the $28-per-barrel upper limit of the price band.
By hosting the summit, former paratrooper Chavez extended his emerging role as an unusual spokesman for the developing world. After leading a failed coup attempt in 1992, he won the presidency in December 1998 and was reelected in July to a six-year term under a new constitution that entrenches presidential power.
He annoyed the U.S. government by visiting Iraqi leader Saddam Hussein and Libyan strongman Moammar Kadafi in August in advance of the summit. It was the first visit by a head of state to Iraq since the 1991 Gulf War--the last time prices soared this high.
Neither Hussein nor Kadafi attended the OPEC summit, sending their vice presidents instead.
One of Chavez’s first acts as president was to break Venezuela’s tradition of rampant overproduction of its OPEC quotas. That cutback ultimately helped revive prices in 1999 and this year, which has brought Venezuela, a major U.S. oil supplier, and other OPEC members a huge surge in revenue.
Chavez said the meeting of OPEC’s heads of state--the only summit other than a 1975 gathering in Algeria--had dispelled any notions that OPEC was split, adding, “From this summit, OPEC goes forward much strengthened.”
