From today's OPEC meeting. Looks like oil prices will remain high:
OPEC Ministers Fail to Reach Accord
On Oil Output After First Day of Talks
An INTERACTIVE JOURNAL News Roundup
VIENNA -- OPEC oil ministers failed to reach agreement Monday on how much crude oil to add to global supplies, with Iran seen as the chief obstacle to a consensus that could provide some price relief to consumers.
The oil ministers were slated to resume their discussions Tuesday.
Iran accepts the need for the Organization of Petroleum Exporting Countries to boost petroleum output, the Iranian oil minister said, but the boost his country favors might not be enough to ease prices.
Why Oil Price Tripled in 15 Months Even as Nations Strove to Limit It
Iranian Oil Minister Bijan Namdar Zangeneh spoke Monday prior to a formal gathering of all 11 OPEC oil ministers.
Mr. Zangeneh told reporters that he supports some higher level of output during the second quarter. But he refused to say how much of an increase Iran was willing to support. "I won't talk on numbers, but we don't want a market shortage," he said.
Iran, OPEC's second-largest producer, is believed to favor boosting output by about 1.2 million barrels a day -- an amount that probably would do little to reduce world oil prices.
Two other key producers in the group, Saudi Arabia and Kuwait, support a production increase of 1.5 million to 1.7 million barrels a day. The upper limit of their proposed increase would amount to about 7% more than what OPEC members agreed to pump after curtailing output last March. OPEC members already are producing more than that ceiling, however, so much of the higher quota would go toward legitimizing the overproduction.
The smaller increase sought by Iran would barely cover the estimated 1.2 million barrels of "unofficial" oil that OPEC members are currently pumping each day. This cheating on production quotas would mean a minuscule amount of new oil actually reaching the market if Iran prevails.
For U.S. motorists and other consumers of refined products such as gasoline, much hinges on efforts by Saudi Arabia, OPEC's largest producer, to win Iran over to its point of view.
"I am not opposed to any increase," Mr. Zangeneh said. "What we are concerned about is the volume of the increase." He stressed that Iran, which has long taken a hard line on oil prices, would only back a modest increase during the next three months.
Oil Prices Remain Near Recent High
Oil prices tripled to a March 8 peak of $34.37 per barrel, following OPEC's decision last March to slash production. Prices for U.S. West Texas intermediate crude in the U.S., the world's biggest consumer of oil, have slipped somewhat in recent weeks to close Friday at $28.02. They inched below $28 Monday to close at $27.79, down 23 cents a barrel on the New York Mercantile Exchange.
U.S. motorists now pay an average of $1.59 per gallon for unleaded gasoline, an increase of nearly 60 cents since prices bottomed out at 99.8 cents per gallon in February 1999, according to a Lundberg Survey of 10,000 U.S. gas stations released Saturday.
Industry analysts warn of possible shortages and $2-a-gallon gas during the peak driving season this summer.
OPEC pumps more than 26 million barrels of crude each day, or about 35% of the world's supply. Key non-OPEC producers, such as Mexico and Norway, are watching to see what OPEC will do before adjusting their own output.
OPEC President Abdallah bin Hamad Al Attiyah told the other ministers in his opening address that heads of delegations will "carefully examine all the relevant issues, with the objective of harmonizing the interests of producers and consumers as quickly as possible."
The Saudis want to stabilize prices at a level that won't cause extreme economic pain for the nations that buy its oil. If high prices start damaging economies, producers fear that demand for oil -- and OPEC's export earnings -- could plummet.
U.S. Looks for Larger Output Increase
The U.S. is hoping for an even bigger increase than what the Saudis and Kuwaitis have targeted.
U.S. Energy Secretary Bill Richardson recently visited eight OPEC countries to lobby for greater production, adding a new dimension of politics into what is already a delicate process for OPEC of reaching a unified policy.
"The difference this time is the U.S. is involved," said Raad Alkadiri, an analyst with Petroleum Finance Co., a Washington-based consultancy.
Mr. Alkadiri attributed Mr. Richardson's shuttle diplomacy largely to the sense of "quasi-crisis and hysteria" that many Americans feel about the recent run-up in oil prices.
Meanwhile, Federal Reserve Chairman Alan Greenspan said rising oil prices don't appear to be increasing inflationary pressures on the U.S. economy. But he warned OPEC members that high prices don't serve their long-term interests.
Testifying before the Senate Special Committee on Aging, Mr. Greenspan said the U.S. economy isn't entirely immune to the effects of rising oil prices. "Even though there has been a very substantial decline in the intensity of energy requirements in the United States economy, it's still quite large," Mr. Greenspan said. "And there is no doubt in my mind that energy, which tends to cut across all aspects of the economy, if it gets significantly costly, would have materially negative effects on the economy." |
