OPEC: Don't Blame Us

Condi Rice and John Negroponte
CBS
The Organization of Petroleum Exporting Countries said Wednesday governments and market speculators, not its members, were primarily to blame for soaring fuel prices.

"Make no mistake, there is a balance between supply and demand, meaning that OPEC is producing enough crude to satisfy the global thirst," the group's Secretary General Rilwanu Lukman told an international energy conference.

Lukman said one factor behind high pump prices was exorbitant taxes placed on petroleum products by regional governments.

Some of the taxes are as high as 80 percent of the pump price. It was unfair to blame OPEC alone, he said.

U.S. Energy Secretary Bill Richardson said Tuesday that oil prices approaching $38 were "dangerously high" and the White House would not hesitate to use all options to fight soaring energy prices.

Richardson declined to say whether the release of oil from the nation's Strategic Petroleum Reserve was imminent.

Richardson reiterated that all options were on the table to protect Americans from rising energy prices. He met privately at the Capitol with Northeastern lawmakers, who urged the administration to release oil from the Strategic Petroleum Reserve as soon as possible to prevent a spike in home heating oil prices this winter.

President Clinton, meanwhile, said he wanted "a few more days" to assess oil market reaction to OPEC's recent production increase before deciding whether to release oil from the reserve.

"I just think we need a few more days to see what the real market impact of the OPEC decision is," Clinton said. "We have some time before it would be too late to affect the supplies and availability of all the products we'll need as the cold weather sets in."

The White House has said Clinton was considering drawing down supplies from U.S. emergency stockpiles among other options to reduce high prices and short supplies.

But since the spring OPEC countries have increased crude supply to international markets to some 3.2 million barrels a day to stabilize the market, according to Lukman.

"Yet prices have stubbornly maintained their strength," he said. "The main reason behind the high oil prices is what I like to term as market hype."

Lukman said OPEC wanted to first see the market's reaction to a scheduled 800,000-barrel-a-day increase effective Oct. 1 before planning any other hikes in output.

If prices remain above $ 28 a barrel another increase in output targets in late October would be possible, he said.

Lukman also said he did not think United States should release oil from its Strategic Petroleum Reserve.

"There is no shortage of oil on all accounts. Even in experts' and analysts' opinions, there is no shortage of oil," he said.

Meanwhile, the International Monetary Fund said that high oil prices were casting doubts over its upbeat forecasts for next year.

The World Economic Outlook, the IMF's flagship publcation on the state of the global economy, forecast world growth of 4.7 percent this year and 4.2 percent in 2001, well above the forecasts it made six months ago.

IMF chief economist Michael Mussa, speaking at a news conference launching the Outlook, said the higher than expected oil price could knock half a percentage point off those growth figures, bringing global growth down to 3-3/4 percent.

"Rather than 4-1/4 (percent) next year, we think of 3-3/4, assuming that the increase in oil prices does recede gradually over the course of the year," Mussa said.

"If oil prices were to stay at $35 a barrel throughout 2001 or if they were to escalate to $40 a barrel or over, then the impact on inflation and world growth would be more significant."

Mussa said current oil prices, which have risen $6 to $7 since the IMF completed its economic forecasts in August, would add some $200 billion to the world's annual energy bill.

As the U.S. braces for a high heating prices this winter and Europe reels from a wave of fuel protests, oil prices remained at their highest price Tuesday since the 1991 Gulf War.

NYMEX crude oil futures remained at $37 a barrel on Tuesday midday amid growing tensions in the Middle East and as Saudi Arabia signaled it would wait to see the impact of OPEC's latest output increase before taking further steps to rebalance the market.

Crude for October delivery advanced $1.08, or 3 percent, on Monday, gaining amid fears of supply disruptions after Iraq renewed last week allegations that Kuwait was stealing its oil.

The benchmark price of New York Mercantile Exchange oil for October delivery is now above $37 a barrel. Prices have exceeded $28 since the first week of May.

Meanwhile, Protests in Britain, France and other European countriesbegan earlier this month as prices for gasoline and diesel fuel were boosted by higher crude oil costs and a strong U.S. dollar.

This winter, heating oil prices in the Northeast are expected to rise by at least 20 percent. In the Midwest, where heating oil is not widely used, gas prices are expected to be the biggest problem.

Some fear the rising prices could cause a recession.