Oil price increases should be 'modest’

Press, Volume CXVI, Issue 34151, 12 May 1976, Page 29

Oil price increases should be 'modest’

Press Association) NELSON. Any future oil price increases are likely to be modest amounts, says the managing director of Mobil Oil N.Z., Ltd (Mr G. Duncan)

He was speaking at the Mobil dealers’ conference, which is being attended by more than 400 people, in Nelson.

Middle-East oil producers had been surprised at the way consuming countries had adjuster) to a lower level of consumption to combat the “incredible hike” in crude oil prices in recent years, Mr Duncan said. “In a situation where we have crude oil surpluses, it would certainly seem to be against their best interests to force prices up again,” he said.

“The situation now is that some of these Middle-East producers are becoming more than a little concerned about the low level of crude liftings and the revenues they rely on to finance the major economic progress to which they are committed.

“While I feel fairly confident that we won’t see any further massive price hikes — certainly not in the order of those experienced in the recent past — I feel equally sure that prices won’t fall. There will be only modest increases from now'on. Oil production from such areas as the North Sea and Alaska should have a stabilising influence on oil prices. They would reduce the industrial West’s dependence on traditional supplies of oil. “It may seem paradoxial

that in a situation of world surpluses of crude oil, the oil industry should be making huge investments to bring new oil and gas fields into production. But this is absolutely necessary if we are to prevent the Organisation of Petroleum Exporting Countries from holding us to ransom again, as was the case with the 1973 embargo,” he said. Explaining what he meant by surpluses, Mr Duncan

,said that before the 1973 'embargo, oil industry analysts predicted there would be a 7 per cent growth in oil demand in the next decade. These estimates had now been revised to 4 to 5 per cent growth rate for the period.

“This means, of course, that over the next decade] we are going to have a sizable excess capacity in crude oil, refining, and also in shipping." Mr Duncan said he fully supported the dealers’ claim for an increased margin. He believed it should be done by reducing tax rather than increasing the retail price.