It would appear that my prophecy/view is shared by others.... read this article:
OPEC Hints at Production War If Other Producers Exploit Its Cutbacks
HOUSTON--(BUSINESS WIRE)--March 19, 1999--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the 2 million barrels per day of oil supply that is being withdrawn from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 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 U.S., out of business. This issue will be the subject of another
article in the March 22 edition of ''Oil & Gas Journal.''
''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-OEPC 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. |
