OPEC chief sees big crisis if capacity remains same

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OPEC chief sees big crisis if capacity remains same

By Alexandra Olson

ASSOCIATED PRESS

September 14, 2000

CARACAS, Venezuela -- The president of the Organization of the Petroleum Exporting Countries said yesterday an energy crisis is imminent in the medium term if worldwide refining and production capacity doesn't grow.

Ali Rodriguez, who is also Venezuela's oil minister, said OPEC's latest output quota agreement is enough to meet worldwide crude oil demand but the sparse production and refining capacity of some OPEC and non-OPEC countries could block efforts to cool record-high oil prices.

"On the horizon there is a very severe crisis if capacity limitations of OPEC and non-OPEC countries stay as they are," Rodriguez said in a news conference.

In an effort to lower soaring oil prices, OPEC agreed to raise its target output for the third time this year in its Vienna, Austria meeting last weekend. Its new target, effective Oct. 1, is 26.2 million barrels a day from 25.4 million barrels a day.

International pressure on OPEC to increase production mounted in the weeks leading up to the meeting after soaring fuel prices sparked protests from transport workers in Europe this month and in the United States earlier this year.

OPEC countries produce almost 40 percent of the world's oil.

Rodriguez said OPEC has spare capacity of more than 2 million barrels but "several OPEC countries are already nearing their capacity ceiling." He denied reports that Venezuela was among those countries with no extra capacity.

Norway, which is not an OPEC member but often cooperates with the organization, admitted earlier this month that its oil wells are already producing up to capacity.

Insisting that OPEC's 800,000 barrels a day quota increase is enough to meet worldwide demand for crude, Rodriguez called on consuming countries to increase refining capacity and lower gasoline taxes.

"The principal factor that increases (fuel prices) for the man who goes to the gas station to fill his tank are high taxes," Rodriguez said.

OPEC estimates that taxes and refining activities contribute to 84 percent of gasoline prices while the price of crude contributes 16 percent.

Leaders in Britain, Belgium and Germany say they won't lower fuel taxes despite angry protests by truckers and farmers that blocked traffic and forced gasoline stations to close. Rodriguez said falling refining capacity, especially in the United States, has created a "bottleneck" effect that prevents finished oil products -- such as gas -- from reaching the market in time to meet demand.

Rodriguez said OPEC wants to avoid an "irrational" production increase that could lead to a price crash similar to the one in 1998 when international oil prices reached nine-year lows. The economies of some OPEC countries are still struggling to recover from that crash, Rodriguez said.

Even so, Rodriguez said OPEC is willing increase production a fourth time this year if the market calls for it. OPEC agreed to meet again in Vienna on Nov. 12 to reassess market conditions.

http://www.uniontrib.com/news/business/20000914-0010_1b14opec.html

-- Carl Jenkins (Somewherepress@aol.com), September 16, 2000


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