- The Washington Times - Monday, September 11, 2000

OPEC members, responding to a chorus of complaints about high oil prices from around the world, announced yesterday they will pump another 800,000 barrels of oil a day starting Oct. 1.

The 3 percent increase to 26.2 million barrels accounting for about one-third of world consumption is a little more than expected. It should keep crude oil prices down from the 10-year high of $35 a barrel hit in New York last week, analysts said, but it probably will not do much to lower soaring prices for home heating oil in the United States.

The decision by the 10-member oil cartel in Vienna, Austria, comes after an extraordinary week of clamoring for oil by President Clinton and European and Asian leaders. Protests against high fuel prices and taxes broke out throughout Europe and nearly shut down France's economy. Asian ministers yesterday warned that high oil prices threaten growth in that region.

While Mr. Clinton personally secured a pledge to open the oil spigot from OPEC's biggest producer, Saudi Arabia, at the U.N. Millennium Summit in New York last week, administration officials yesterday were cautious not to declare victory.

"Whether such an increase will stabilize the market remains to be seen," said Energy Secretary Bill Richardson. "We are keeping all options open to make certain that Americans can heat their homes this winter."

Mr. Clinton is considering releasing oil from the U.S. Strategic Petroleum Reserve to force down heating oil prices that are averaging 30 percent over last year and may spike even higher if the winter proves to be a cold one. The reserve was created by Congress in the mid-1970s after the Arab oil embargo. It currently holds 571 million barrels of crude in several underground salt caverns in Texas and Louisiana.

Analysts expect the administration move this month if the OPEC increase fails to relieve pressure not only on crude-oil prices, but on the prices for refined products such as heating oil, diesel fuel and gasoline.

Clinton administration officials credited Saudi Arabia, which called for an addition of 1 million barrels a day, with getting the larger-than-expected increase. Other members of the Organization of the Petroleum Exporting Countries have little capacity to produce more oil, and resisted an increase of more than 500,000 barrels a day.

"We think this is enough, but we want consumer nations to work to reduce taxes" to get more price reductions at the consumer level, Qatari Oil Minister Abdullah Attiyah told reporters in Vienna. "We cannot solve the whole problem," he said.

Fuel taxes amount to about a quarter of retail prices in the United States, but they are three times that high in Europe. Striking fishermen, truckers, taxi drivers and farmers succeeded in winning exemptions to some of those French taxes, which are among the highest in Europe.

The OPEC members agreed to meet again on Nov. 12 to review the impact of the production increase. Saudi officials said the cartel may boost pumping by another 500,000 barrels a day if the price of oil stays above $28 a barrel for 20 consecutive days even with the increase.

"This deal shows that OPEC is serious about trying to get prices down," said Gary Ross of Petroleum Industry Research Associates. Crude prices dropped to $33.63 in New York Friday in anticipation that OPEC would add about 700,000 barrels a day.

But Mr. Ross sees little impact on the already high price of heating oil. "Prices will stay high this winter because this will do nothing to solve the shortage of refined products. Heating-oil stocks are going to stay very low," he said.

Gauging the impact of the production increase on prices is difficult in part because OPEC members routinely "cheat" and pump more than their quotas.

Saudi officials say they already are pumping 600,000 barrels more than the cartel agreed to in June, so it isn't clear how much more oil actually will be coming on stream. The Saudis are expected to continue "leaking" oil in an attempt to draw down prices to the mid-$20 level that all sides say they want.

Besides Saudi Arabia, only Kuwait and the United Arab Emirates within OPEC can substantially ramp up production at this time, analysts say. Outside OPEC, Mexico, Norway and Oman say they too will increase output. Russia, another major producer, says it won't increase exports.

OPEC's latest action lifts its total production increases this year to 14 percent. Demand for oil around the world has been much higher than economists anticipated and is the reason for today's sharply higher prices and shortages.

Senate Majority Leader Trent Lott said this week's scramble for oil shows that the Clinton administration has left the United States vulnerable to foreign oil producers. Appearing on CNN's "Late Edition," he said he doubts the 800,000 barrel increase will have much impact on prices.

"That's less than 1 percent of the world's needs," the Mississippi Republican said. "We've allowed ourselves to get dependent on these OPEC countries that can cut down the supplies, can drive up the costs, anytime they want to."

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