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RPT-Oil sits tight, ponders Iraq-U.S. cat-and-mouse play
Oil sits tight, ponders Iraq-U.S. cat-and-mouse play
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WRAPUP-U.S. hits out at oil producers, says prices harmful
Reuters, 09.21.02, 6:42 AM ET
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(updates with EU, India paras 8-9, Saudi paras 22-23)
By Andrew Mitchell and Richard Mably
OSAKA, Japan, Sept 21 (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 industrialised 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 Organisation 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
destabilising 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
towards 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.
Copyright 2002, Reuters News Service
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