U.S. Says Oil Prices Harmful
Saturday September 21, 9:33 am ET
Reuters Business Report
By Andrew Mitchell and Richard Mably
OSAKA, Japan (Reuters) - The United States on Saturday, in an apparent swipe at the OPEC cartel, called high oil
prices harmful and potentially damaging to world economic growth.
"High prices could produce an undesirable ripple effect on the economies of the world," said U.S. Energy
Secretary Spencer Abraham.
"If the industrialized world experiences an
economic slump its markets for the developing
world's products will contract, damaging
developing economies."
Abraham was addressing the opening session
in Osaka of the International Energy Forum of
some 60 oil consuming and producing
countries, included most OPEC nations.
He was speaking after the Organization of
Petroleum Exporting Countries this week defied
consumer country calls for extra oil to meet
winter demand.
Their agreement helped support oil prices near
$30 a barrel for U.S. benchmark crude but
traders say U.S. plans to oust Iraqi leader
Saddam Hussein, by force if necessary, are
the biggest factor behind this year's 40
percent rise in oil prices.
Other major consumer interests echoed Abraham's concerns.
European Union Energy Commissioner Loyala de Palacio told reporters: "There is concern that prices are at the
top of the limit. This doesn't help economic recovery which is taking longer than expected."
"In our opinion the real long-term balanced price is just above $20.
Indian Energy Minister Ram Naik said India's comfort zone for prices was $22-$24 a barrel. "The existing price
concerns me and many developing countries like India," he said.
WON'T BEG
Abraham made no direct mention of OPEC.
But he condemned the record of international oil markets since the mid-1990s, saying that volatile prices were
"becoming increasingly problematic."
"High prices may be pleasing to producers in the short term but in the long term volatile pricing regimes of this kind
are destabilizing and harmful to all participants in the market," Abraham said. U.S. oil prices since 1998 have
swung between $11 and $37 a barrel.
It was Washington's harshest public criticism of oil producers since the administration of oilman George W.Bush
came to office in January 2001.
Until now, Abraham has preferred to use quiet diplomacy, only urging OPEC to let free markets set prices.
That tack has not worked. OPEC in January cut its production quotas to the lowest level in a decade, helping force
prices toward the top end of the group's $22-$28 a barrel target, equivalent to $30 for U.S. crude.
Abraham said Washington would not go cap in hand to OPEC for more oil.
"We aren't going to beg for oil. Producers have their way of looking at things and the U.S. has to do that as well,"
he said.
But he sought to remind producer states of their pledge to maintain stable supplies.
"It has been most welcome that many oil suppliers have come forward to provide assurances to the market that
they would take action to increase production were there ever to be an interruption in the flow of world oil
supplies."
He made no mention of U.S. military plans to remove Saddam Hussein, president of OPEC founder member Iraq.
OPEC's powerful minister, Saudi Arabia's Ali al-Naimi said there was no question of Riyadh's reliability as the
world's leading source of oil.
Also speaking in Osaka he said: "I can't think of any producing nation that has gone to the extent of the kingdom in
servicing its dedicated customers and shoring up any weaknesses in the global oil market." If oil prices stayed
high, Abraham warned producers, they would backfire on the supplying nations by making alternative energy
resources economic.
"Extended periods of high prices make previously uneconomic alternatives attractive and will lead sooner rather
than later to the result net producing nations want least: early discovery of a permanent low price alternative," he
said. |
