OPEC Says, No Control on Record $75 Oil Price
Location: Doha
Author:
Ellen J. Silverman
Date: Tuesday, April 25, 2006
OPEC ministers concluded on Monday there was nothing they could do to halt surging oil prices that threaten economies and could trigger a collapse in demand disastrous to producer states.
The group concluded at talks here that raising its 28 million barrels per day (bpd) output ceiling would not rein in runaway prices. "The market determines the oil price," Saudi Oil Minister Ali Al-Naimi told reporters. "You know and I know that the reason the price is where it is not from a shortage of (crude oil) supply," he said.
Oil raced to an all-time high above $75 last week as Iran continued to defy world pressure to halt its nuclear program, a quarter of Nigeria's output lay idle after rebel attacks and Iraq's once considerable oil industry was mired in crisis. Consuming nations are afraid high energy costs will snuff out economic growth. Producers fear a price collapse.
OPEC ministers had little enthusiasm for a Kuwait proposal to offer up all the organization's spare capacity of two million bpd as they did in September when oil spiked above $70 a barrel. Then a lack of motor fuel in the United States was partly to blame for the price surge. At that time hurricanes had damaged U.S. refineries. Now the introduction of new, cleaner U.S. gasoline may disrupt supplies in the short term, Energy Secretary Sam Bodman said. Some OPEC delegates also blame U.S. foreign policy. Libya's top oil official said fears of a U.S. strike on Iran, the world's fourth biggest crude exporter, had added $15 to the cost of a barrel of oil. Kuwait's oil minister reckoned another $7 had been added by consumers' sense of vulnerability.
Top exporter Saudi Arabia, a close U.S. ally, also spoke of international tension. "There is nothing that can be done about the tension that has been created and until that tension abates the price will continue to be high," Naimi said. Investors agreed OPEC could do nothing to steer oil from its highest level in real terms since 1980, the year after the Iranian revolution. "OPEC can't do anything about the upside to the market. They don't have much scope left for managing," said Michael Coleman, managing director of hedge fund Aisling Analytics.
Energy consumers and producers here for the three-day International Energy Forum agree there is an urgent need to bring down prices. But they are split over how to do it. Consumers want greater access to oil and gas in the Middle East, Russia and Africa. Producers want to be sure investing in new fields will pay off. Both sides criticize major oil firms for failing to build new refineries. OPEC members point out that they have raised oil output by over 10 percent since 1999. Saudi Arabia alone will spend $50 billion over the next five years on new fields and refineries. In contrast, the United States, which uses a quarter of the world's oil, has not built a refinery on its soil for decades. A conciliatory Bodman said he would not ask OPEC to pump more even though U.S. gasoline has reached $3 a gallon. "We have encouraged producing nations to keep oil markets well supplied -- I think they've done that," he said.