Report: OPEC Hints at Possible All-out Oil Production War
Houston-March 19-FWN--The Organization of Petroleum
Exporting Countries (OPEC) "will not stand idle" if the
group sees that the 2 million barrels per day of oil supply
that is being withdrawn from the market is taken up by non-
OPEC producers.
That warning from OPEC was issued today, ahead of the
group's ministerial meeting in Vienna this week, by new
Venezuelan Energy and Mines Minister Ali Rodriguez Araque in
a special commentary written exclusively for the March 22
issue of "Oil & Gas Journal," the Houston-based, weekly
magazine of international petroleum news and technology.
The commentary accompanies "Oil & Gas Journal's"
coverage of a watershed agreement in Amsterdam March 11-12,
of which Rodriguez was a key architect, under which OPEC and
certain major non-OPEC exporters agreed to withdraw more
than 2 million barrels per day of oil supplies from world
markets beginning April 1. OPEC is expected to formally
ratify the agreement this week.
The surprise agreement is seen as critical for
providing a boost to oil prices, thereby giving relief to
depressed oil markets groaning under a worldwide glut of oil
inventories. The collapse of oil prices during the past 18
months has spawned heavy losses and layoffs by companies in
the petroleum sector and has crippled the economies of key
oil-exporting nations. Since the agreement was disclosed,
the price of crude oil futures in New York topped $15 per
barrel for the first time in about 6 months.
Rodriguez told "Oil & Gas Journal" that any attempts by
non-OPEC producers to step up their oil production in
response to the higher prices resulting from the Amsterdam
and Vienna accords would constitute a "suicidal"
strategy.
"(OPEC) would be losing market share, allowing higher-
cost producers to occupy our space in the market, and,
eventually, suffering again from depressed prices,"
Rodriguez wrote.
He hinted at the possibility of an all-out oil
production war in such an event.
"Just as the industrialized nations have their
extremists and 'policy hawks,' so do we in OPEC," he
continued. "Some will argue that we should open our
production to full capacity, drive high-cost oil out of the
market and go for a 'market-share' strategy."
Rodriguez said he disagrees with this strategy, as do
some of his colleagues and the Mexican oil minister, terming
it a "lose-lose strategy." However, he noted, neither can
OPEC condone a "win-lose" strategy in which OPEC loses
market share while others benefit.
"Let us all reflect on this matter: The OPEC ministers
convened in Vienna are well-intentioned, but we are not
collectively stupid."
Rodriguez also dismissed claims by some U.S.
independent producers that key exporters such as Venezuela
and Saudi Arabia are "dumping" low-cost oil on U.S. markets
in a bid to drive higher-cost producers, such as those in
the United States, out of business.
"There is a community of interests between OPEC and
U.S. producers," Rodriguez wrote. "Rumors about (Venezuela)
dumping oil into the U.S. market and Saudi Arabia seeking to
drive U.S. producers out of business are absurd," he said.
"We are the first affected by the drop in oil prices. Our
voluntary cutbacks should be the best proof of our efforts
to stabilize the market and get over this slump."
Rodriguez warned that independent producers must take
heed that OPEC expects "everyone to share in these
cutbacks."
The minister, who took his post in early February when
the new government of Venezuelan President Hugo Chavez
assumed power, called for OPEC and non-OPEC producers to
work together to stabilize the world oil market, terming the
Amsterdam agreement "a huge effort in this direction."
Rodriguez contends oil is too critical a commodity to
be left to the vagaries of market forces, claiming that
today's extremely low oil prices will prove "disastrous" for
the world by crippling efforts to expand productive capacity
in the years to come, when rebounding demand creates a dire
need for that incremental capacity.
End
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