Oil producers hit crisis point
FOCUS - Oil off lows but producers hit crisis point
By Andrew Mitchell
LONDON, Dec 11 (Reuters) - Desperate oil producers on Friday warned of social unrest and potential economic warfare if action were not taken soon to reverse a calamitous price slump.
Algeria highlighted rising producer alarm with a broadside against fellow OPEC members it accused of deepening the price crisis, and a vow to take action to protect its own interests.
''The drop in oil prices is not because of economic considerations but has more to do with the selfishness of certain OPEC members,'' Algerian Prime Minister Ahmed Ouyahia told parliament late on Thursday. ''Algeria remains in solidarity with OPEC, but if this selfishness persists, Algeria will utilise all its capacities. We are in a situation of an economic war.''
Producer tensions are growing as their output sacrifices are rewarded only with further price falls, a combination that has sliced more than $50 billion from OPEC's oil export revenues this year.
Algeria's threat partnered a warning from Libya that oil-dependent economies face severe social unrest unless producers move quickly to make new production cuts.
Libyan Energy Minister Abdullah al-Badri demanded that OPEC should withdraw a further two million barrels per day (bpd) of output, on top of its existing 2.6 million bpd package. ''I call (on OPEC members) to move quickly because the situation is becoming very dangerous and might lead to social problems in these countries,'' al-Badri told the Libyan Congress on Thursday. A 35 percent crash in Libya's oil revenues this year had left the government unable to pay state salaries, added Finance Minister Mohamed beit al-Mal.
OPEC's current reduction of barely three percent from 75 million bpd world supply has proved far too mild to counter the impact of swollen inventories and dwindling demand. Yet at last month's ministerial meeting the fading cartel failed even to extend existing cuts as declining revenues laid bare a long battle for market share between key members Saudi Arabia, Venezuela and Iran.
While Saudi Arabia and other big Gulf producers this week did agree to extend cuts through to the end of 1999, Venezuelan President-elect Hugo Chavez on Thursday declined to commit to extending reductions beyond June. Chavez has already said he does not foresee any new production cuts. Without agreement from Caracas its rivals for the huge United States market, Saudi Arabia and non-OPEC Mexico, are unlikely to cut again, raising the spectre of further price falls before OPEC meets again in March. |
