Condor on that oil cut, please see my response last week and this piece of news...
Richardson said he was encouraged to hear that the kind of precipitous production cuts being proposed by such price hawks as Iran and Venezuela -- as high as 2 million or 3 million barrels a day -- will not be supported by Saudi Arabia, the world's biggest oil exporter and the most powerful voice in the cartel.
Last week, Saudi Arabia's national oil company, Aramco, told its customers to expect reduced deliveries in February amounting to 500,000 barrels a day, about 5 percent of total Saudi production. This figure would be in line with Saudi Arabia's anticipated share of a production cut if the cartel as a whole agreed to trim 1.5 million barrels a day.
But Richardson said it is clear that even Saudi Arabia and its gulf neighbors -- which remain solicitous about sustaining close ties with their U.S. ally 10 years after American forces helped drive Iraqi invaders out of Kuwait -- are fearful about the damage another oil glut could cause their economies.
"These countries are just obsessed about what happened to them after they decided to raise production at the Jakarta conference in 1998," Richardson said. "But they have to realize that the only way we achieve stability in the global oil markets is by having a cooperative dialogue between producers and consumers. We need to find a healthy range for all concerned, because $10 a barrel is too low and $30 a barrel is too high."
Richardson said he was received with warmth and hospitality during his tour. When he arrived in Kuwait late Sunday, Saud Nasir Sabah, the sheikdom's oil minister, delayed their discussions so they could watch the NFL playoff games on television.
But while his charm offensive was greeted cordially, Richardson's appeal for small or no cuts in oil production was rebuffed with lectures about the need to consider mutual interests. "We agree there should be consultations between us to avoid any negative impact on the economies of the United States and Europe," Richardson quoted the Kuwaiti minister as saying. "But when we look at the interests of our friends and allies, we expect them to also look at our interests and how our economies are so dependent on oil."
After the debacle in Jakarta, several OPEC members -- including Algeria, Venezuela, Iran, Indonesia and Nigeria -- suffered a near collapse of their oil-dependent economies that contributed to political instability. Even Saudi Arabia suffered a serious budget shortfall that prompted the affluent desert kingdom to seek emergency loans for the first time in its history.
But since last year, OPEC countries -- which account for about 40 percent of the world's oil output -- have reaped a windfall in profits as demand for oil picked up in virtually every corner of the world. After suffering through several years of recession caused by weak revenues, the cartel's 11 members saw their oil income jump by 75 percent last year to $285 billion, according to OPEC statistics.
In response to a surge in prices last year that sent the cost of crude oil soaring to the highest levels in a decade, OPEC raised production on four successive occasions by a total of 3.75 million barrels a day. By this spring, however, after the heavy consumption of heating oil ends in the Northern Hemisphere and before the summer driving season picks up, OPEC fears there will be a sharp decline in consumption that could drive prices down.
For that reason, many OPEC leaders insist that radical measures are required to soak up excess oil supplies before a glut develops. "We realize that world economic growth is going to be slower this year than last and that will impact oil demand," said Ali Rodriguez, Venezuela's oil minister before becoming OPEC secretary general two weeks ago. "But we figure that after cutting production, if prices rise too much we can always correct that, because it's always more easy to correct an increase in price than a fall."
But others say there is a zero-sum game at work and that, contrary to pleas for cooperation, there is an inherent struggle between producers and consumers that bears hostile overtones of class warfare between the rich oil consumers of the West and poor producing nations of the Third World that are dependent on oil exports as their only source of income.
"It's clear that Europe and the United States only want very low prices," OPEC's acting president, Algerian Oil Minister Chakib Khalil, told reporters. "Do they want to see the same prices as 1988? And do they care what will happen to us? If we don't do any cuts, we're going to see those prices as early as the second quarter of this year." |
