E.E.C. adopts plan to cut spot oil prices

Press, 29 October 1981, Page 8

E.E.C. adopts plan to cut spot oil prices

NZPA-Reuter Luxemburg European Economic Community Energy Ministers yesterday agreed on measures aimed at, preventing, sharp rises in spot prices for oil when supplies drop below normal levels. A statement issued after a day-long meeting said Ministers had agreed to meet promptly at the request of the E.E.C. Commission in the event of a limited drop in oil supplies. They would then review several possibilities which include: asking oil companies to refrain from abnormal purchases, use of commercial stocks in preference to new purchases, replacement, of oil by other forms of energy in the public and private sectors, and the maintenance of high domestic production — a reference

essentially to British oil supplies.

The measures would be applied when supplies are reduced, although not low enough to meet the International Energy Agency’s definition of a crisis. The 1.E.A., of which all E.E.C. countries except France are members, has already set up a programme of oil-sharing should supplies fall more than 7 per, cent.

Spiralling prices on the spot market in 1979 after the Iranian revolution led to a decision by the Organisation of Petroleum Exporting Countries to raise their official prices, and E.E.C. countries have sought for more than a year to agree on measures to avoid a repetition.

The Commission, with strong Italian backing, had

suggested a pooled E.E.C. oil reserve for use in periods of scarcity, but strong opposition from West Germany and the complexity of the proposal meant it was dropped. E.E.C. diplomats have expressed concern that any measures which did not involve the I.E.A. would not have the desired effect of stabilising prices. In Geneva. O.P.E.C. Oil Ministers appear broadly agreed on a new unified oil price of SUS 34 a barrel, although there may be hard bargaining over a ceiling for top. petrol-rich crudes, according to O.P.E.C. sources. They said there was a really good chance of accord on a new pricing structure being reached at their meeting todav but that a deal could yet come unstuck on the issue of the price ceiling.