Asia Times: Global Economy


	June 28, 2002	atimes.com

Global Economy

OPEC has new leader, plan
By Andres Canizalez

CARACAS - The Organization of Petroleum Exporting Countries (OPEC) will maintain caps on its production with the aim of pushing up prices to about US$25 a barrel, after a sharp slump that began to be reversed in April.

Venezuelan Energy and Mines Minister Alvaro Silva Calderon was appointed secretary general of OPEC on Wednesday in a unanimous decision reached by the 11 member states: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

Silva Calderon will complete the three-year term initiated in January 2001 by his countryman Ali Rodriguez, one of the main architects of OPEC's policy of supply cutbacks, which non-cartel oil exporters have also joined. Rodriguez resigned as OPEC secretary general when Venezuelan President Hugo Chavez called him back to head the state-owned oil monopoly Petroleos de Venezuela, to overcome conflicts that helped trigger a short-lived coup that briefly overthrew Chavez in April.

The strategy put in place by Rodriguez puts priority on achieving, and maintaining, "fair" international oil prices. Calderon said he would seek "market stability, to avoid a price collapse like the one we experienced in 1998, through concerted policies agreed on with non-OPEC members".

OPEC will have to work hard to ensure strict compliance with the production quotas assigned to each country, which have been exceeded in recent months, oil-industry experts say. The latest cut in production, in effect since January 1, removed 1.5 million barrels a day from the market, and brought the organization's production to 21.7 million barrels a day, 10 percent down from the beginning of the year. Qatari Energy Minister Abdallah Ben Hammad Al Attiya said it would be possible to hold production at 21.7 million barrels a day until year-end.

The cartel was also successful in its bid to get Angola, Mexico, Norway, Oman and Russia to join in the strategy, committing themselves to an additional cutback of 500,000 barrels a day.

Qatar is opposed to any increase in supplies, and wants to see a price of $25 a barrel, which benefits producers as well as consumers, Al Attiya said. Oil prices averaged $27 a barrel in 2000. In September of that year, OPEC adopted a system by which supplies would be increased or cut as needed to keep prices between $22 and $28 a barrel.

A year later, in the midst of an international recession aggravated by the September 11 terrorist attacks on the United States, the average price per barrel began to drop, and declined steadily for six months until hitting $19.88 a barrel in the first quarter of this year. But prices began to recover in April, to a level near OPEC's desired price range. Last week, for example, the average price of the OPEC basket closed at $23.88 a barrel.

Calderon commented that his designation to serve out Rodriguez' term "is a recognition of the role played by Venezuela, and of our country's commitment to the strengthening of OPEC".

Since the Chavez administration took office in February 1999, it has made every effort to bolster OPEC, through a campaign that has included personal meetings between the president and his counterparts in the rest of the organization's member states, and with the leaders of non-member oil producers. In September 2000, Caracas hosted the second OPEC summit ever, on the organization's 40th anniversary. The first such meeting took place in Algeria in 1975.

(Inter Press Service)