- The Washington Times - Friday, March 3, 2000

Oil ministers from Saudi Arabia, Venezuela and Mexico said Thursday they plan to boost world oil supplies after a scheduled cut in production expires later this month.

But even if an agreement is reached among the other major oil-producing countries, U.S. drivers probably will not get relief from record-high gas prices at least until this summer, analysts warned.

"We are now in agreement to boost oil production. The problem is we must agree how much to increase and exactly when it will happen," said Ali Rodriguez, Venezuela's oil minister, after a meeting in London with the oil ministers of Saudi Arabia and Mexico.

All three ministers were instrumental in the decision by the Organization of Petroleum Exporting Countries (OPEC) last year to cut production by about 7 percent, a move that has sent oil prices to a nine-year high. That decision came after years in which OPEC members could not agree on production levels.

"Uppermost in our minds is to maintain stability in the markets," said Saudi oil minister Ali Naimi. But he refused to give details on the size of the expected increase or indicate when it might take place.

Energy Secretary Bill Richardson returned recently from 10 days of meeting with oil ministers and told Congress that he thinks that the odds are nine out of 10 that OPEC will boost production.

One oil analyst warned that other OPEC countries oppose boosting production, a move that eventually would bring down prices for oil-based products like gasoline, jet fuel and heating oil. If all 11 OPEC members don't vote to increase production, each member could decide its own level, which could drive down prices. OPEC also could vote to keep production at current levels.

"That is where the problem lies because countries like Iran and Libya want to keep production down," said Chester Irvin, oil analyst for ABN Amro Inc. in New York.

"They don't want to see $10 [a barrel] oil again, and the longer they wait, the more stocks we use," he added.

Crude oil prices have skyrocketed from $10.72 a barrel on Dec. 10, 1998, to a nine-year high of $32.15 Thursday in trading on the New York Mercantile Exchange, mainly because of dwindling stocks and continued high demand.

Mr. Irvin and other analysts think OPEC ministers are discussing plans to boost production enough so that the price of a barrel of oil would stabilize at around $25.

Even if OPEC agrees to raise oil output when the body meets March 27, gas prices at U.S. pumps will not come down any time soon.

"It typically takes at least six weeks from when they send the oil over before we see an impact here, and it could take even as long as midsummer before drivers notice the change," Mr. Irvin said.

"Pump prices probably will go up a little more before they come down," he added.

The national average price for a gallon of self-serve, regular unleaded gasoline stands at about $1.47, according to industry analyst Trilby Lundberg, who conducts regular surveys of 10,000 stations.

Local gas prices climbed to $1.39 for self-serve, regular unleaded in mid-February, up 41 cents in 12 months, according to AAA-Potomac, which surveys local gas stations.

When the ministers of Saudi Arabia, Venezuela and Mexico decided in February 1999 that a cut in production was needed, the other leading oil producing countries agreed and followed with cuts that sent prices higher.

Mexico, a major oil producer, is not an OPEC member but agreed in March to cooperate with the group in curtailing output. Mexican oil minister Luis Tellez told reporters Thursday that his country now believes "an increase in production is warranted and needed during the year."

The Clinton administration, facing pressure to address rising fuel prices, hailed the oil ministers' announcement.

"The public statements made by the ministers confirm what we've been saying, that both producing countries and consuming countries need stability," White House Press Secretary Joe Lockhart said Thursday in a daily briefing with reporters.

"Now we'll be looking for details," he added.

Rising fuel costs in the past year have hit motorists, homeowners who use oil for heat and industries that depend on fuel for transporting people and goods.

President Clinton and Congress have been examining the effect that skyrocketing home heating oil prices have on poor Americans, particularly in the Northeast. And last week about 250 truckers drove their rigs into Washington to draw attention to higher costs of diesel fuel, which they say could put them out of business.

Mr. Clinton this week said he might consider tapping into the nation's Strategic Petroleum Reserve to boost supply if oil prices do not drop. The reserve, about a 90-day supply, is intended to be used during wartime or other national emergencies.

While the world consumes about 77 million barrels per day, production has fallen to 75 million barrels largely because of OPEC's cutbacks.

OPEC, which produces about 30 percent of the total world oil supply, has slashed output by 4.3 million barrels per day since it began cutting production in 1998.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2021 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide