O.P.E.C.’s dollar woes

Press, 4 March 1978, Page 8

O.P.E.C.’s dollar woes

NZPA-Reuter Vienna Several oil-exporting , nations are seriously considering abandoning the United (States dollar as a price-fix- ■ ling currency for petroleum, I oil-country diplomats have said in Vienna. The 13 members of the Organisation of Petroleum Exporting Countries have, lost millions of dollars daily in recent months because of the steadily declining value of the American currency. An estimated $12,000 million has been lost by O.P.E.C. countries in the last year. O.P.E.C. Governments: [ have several times consid- I [ered dropping the dollar as ■ the currency in which oil [prices are expressed. Each time they have drawn back because of failure to find a reliable alternative. Diplomats from O.P.E.C. .nations said there was a growing feeling that oil prices (at present frozen at an average of $12.70 a 159 litre barrel) should be based Jon a of currencies,!

but member Governments disagreed on which currencies should be included and how much weight; should be given to the dollar! in such an arrangement. The Emir of Kuwait) (Sheikh Jaber Ahmed Sabah)! has said in Kuwait that his] Government may call for a special O.P.E.C. conference to consider the effect on oil revenues. Informed sources said, however, that they did not expect crisis .action of this kind, and quick decisions! were unlikely. The problem; would probably be referred! first to O.P.E.C. Finance! Ministers, who are due to) meet at the organisation’s; Vienna headquarters on May; 10. Although O.P.E.C. petro-, leum is priced in dollars, producing nations accept; other currencies in payment.! But the exchange rate calcu-! lation is always based on* the dollar. When the dollar is down, customers paying in’ other currencies get cheaper oil. In 1975, when the dollar.

was also under pressure, ( O.P.E.C. agreed in principle! I to shift to Special Drawing: of the International' •[Monetary Fund as a basis' ■ for oil prices. i The idea was dropped,. : mainly because the United [Arab Emirates rejected the [plan on grounds that the : mix of 16 currencies used I for S.D.R.'s was too risky on a long-term basis. O.P.E.C. economists are : generally opposed to S.D.R.’s because the artificial asset ; gives heavy weightage to [the dollar. In New York, the Morgan Guaranty Trust Company, a ■ leading bank has said that [member States of O.P.E.C.[ are likely to have a 25 bil-, lion surplus in 1978. about, ,$lO billion down on last; year. i The bank added that “the; [present weak oil market sit-' [uation, as indicated by the; decision of many oil export-i :ing countries to offer oil! price discounts, is likely to! ' over-ride arguments for an oil-price rise at the next ’ O.P.E.C. yieeting in June.” '