U.S. oil suppliers follow OPEC lead

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U.S. oil suppliers follow OPEC lead and boost prices By Dale Kasler Bee Staff Writer (Published March 11, 2000)

Oil prices are going up around the world because OPEC cut production. But how come prices are up in California, which uses very little OPEC oil?

Because that's how the market works. If a major supplier of a commodity raises prices, that provides an opportunity for other suppliers to raise prices, too.

"If you've got a commodity you can sell for 30 bucks a barrel, you're not going to sell it for 15," said Paul Langland, spokesman for Atlantic Richfield Co. in Los Angeles. "No matter where it comes from, you're not going to sell it for less than the world price."

As a result, Arco and other oil companies supplying California are enjoying a considerable windfall; their prices have gone up although their costs haven't. Arco gets very little of its oil from OPEC; almost all of it comes from Alaska.

"Anybody who's producing crude oil is probably making pretty good money," said Tom Glaviano Jr., an analyst at the California Energy Commission.

Oil prices have risen roughly $6 a barrel to about $32 this year. That's costing California about $80 million a week in higher prices.

The oil companies defend the higher prices, saying they make up for the beating they took when prices were low throughout much of the late 1990s.

"A year and a half ago, when oil was being traded for $9 a barrel, that's what led to Arco being sold to BP Amoco," Langland said. "Arco was struggling."

The higher prices also are a relief to California's homegrown, $10 billion-a-year oil production industry, mostly centered in the Bakersfield area. California produces roughly half its own oil, and about 20 percent of California's production comes from independent mom-and-pop operators.

With prices up, the independents have resumed drilling activities after a long dry spell that resulted in layoffs and bankruptcies, said Dan Kramer, executive director of the California Independent Petroleum Association.

"We happen to be benefiting from OPEC's decision to restrict production," Kramer said.

http://www.sacbee.com/ib/news/ib_news02_20000311.html

-- Martin Thompson (mthom1927@aol.com), March 11, 2000


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