O.P.E.C. satisfied price is holding

Press, 14 June 1983, Page 9

O.P.E.C. satisfied price is holding

NZPA Paris Three months into its hard-won pact on pricing and production the Organisation of Petroleum Exporting Countries believes that it is winning the battle to stabilise the world oil market. A four-man Ministerial committee of the exporter group that met in Paris last week reported that all 13 member States were abiding by the accord which was reached at two weeks of intensive talks in London in March. The committee claimed credit on behalf of O.P.E.C. for calming the chaotic market conditions that early this year threatened to send oil prices tumbling, with potentially dangerous consequences for both producers and consumers.

The Paris meeting gave the opportunity for O.P.E.C. in the person of the Venezuelan Oil Minister, Dr Humberto Calderon Berti, to make a rare acknowledgement that O.P.E.C. had been wrong in the 1970 s to push oil prices to unprecedented levels. Dr Calderon said: “I think we made a mistake, we raised the prices too much. We have to change our minds about the price increases.”

The market monitoring committee meeting in Paris made it clear that it intended to recommend that O.P.E.C. should defend its new SUS 29 a barrel bench-

mark, down ?USS on the price in force until March, and continue to limit production to 17.5 million barrels a day until the end of the year. The price and output limits imposed by the London accord in March were a recognition that O.P.E.C. had to take urgent joint action to counter the effects of a lingering glut of oil on the world market.

The two big oil price shocks of the 1970 s — the first coinciding with the 1973 Middle East war and the second with the 1979 Iranian revolution — are held at least partly responsible by Western economists for the inflationary and recessionary cycles that have afflicted the Western industrialised and oil-importing countries over the last decade.

The recession brought a reduction in energy use in the West, while continued high oil prices encouraged consumers to turn to alternative sources of cheap energy. Dr Calderon said that one function of O.P.E.C.’s new moderate stance on pricing was to restore what he called “the credibility of oil as a source of energy.” “As long as uncertainty remains, consumers will try to find other sources of energy,” he said. O.P.E.C. Ministers nevertheless acknowledge that it is not only market uncer-

tainty that' threatens the organisation’s key role on the world energy scene. They are also concerned about the growing status of non-O.P.E.C. countries as oil producers and exporters. O.P.E.C. has been in touch with such producers as Britain, the Soviet Union, Mexico, and Oman in a bid to persuade them that their common interest lies in limiting production to maintain relative high world prices for oil. Countries such as Britain have been able to sustain only the high cost of production in areas such as the North Sea because of O.RE.C.’s earlier success in forcing up world prices. Now, ironically, increased production by these producers poses a threat to O.P.E.C.’s hold on the market.