EU executive urges OPEC production hike
© 2000 Reuters Limited
September 7, 2000
BRUSSELS - The European Union's top energy official warned yesterday oil prices could remain high for some time and called for OPEC producers to raise output.
In a note to the EU's executive Commission, Energy Commissioner Loyola de Palacio said the bloc's message to OPEC should be "to focus on the world economy's vulnerability as regards any price rises resulting from an irrational approach to natural resource management at world level..."She urged EU member states to issue a formal statement stressing they expected OPEC's upcoming meetings to result in "a substantial increase in production".
She hinted the statement should be released at or around a meeting of EU finance ministers on September 29, which coincides with OPEC's planned September 27 to 29 heads of state summit in Caracas.
Oil prices have hit 10-year highs this week as markets fret that any increase in OPEC production, due to be discussed at a cartel ministerial meeting in Vienna on Sunday, will not be enough to fill depleted western stocks.
De Palacio's note indicated the EU executive also believed that a price mechanism adopted by OPEC in June would not bring prices down much, although should stop Brent crude rising above $35 a barrel.
"It does not, however, guarantee stabilisation at the 'target price' of $25, even in the more distant future," de Palacio said in the note.
"Everything seems to point towards oil price remaining high. Our economy and policies will have to adjust to that new order," she added.
"There's no doubt about it, we need more production," de Palacio told a news conference. She declined to say how big an increase in production she would like to see.
She called for a dialogue between consumers and producers to work towards "a stable oil price, a non-volatile oil price".
When asked what she meant, she said: "We are talking about $20, $20 plus" per barrel.
EU MUST ADJUST POLICIES
De Palacio's note said Western oil stocks could continue to be tight for the next year or two and the EU should adjust its own policies accordingly.
Some EU member states could consider a temporary cut in fuel tax for professions such as road hauliers which had been hard hit by high oil prices.
France has already announced plans to cut taxes for truckers, fishermen and farmers.
But a general move to cut fuel taxes in the EU would be wrong, signalling to producer countries that they could continue to push up oil prices without fearing any slackening in demand. De Palacio said EU governments and oil companies could do more to eliminate big pre-tax differences in the cost of petroleum products among the 15-nation EU.
Competition in distribution could be improved, she said, although refused to say if the Commission planned to open a formal anti-trust inquiry into any specific markets.
De Palacio also cautioned EU countries about plans to abandon nuclear power.
"Without nuclear we can forget about our Kyoto targets," de Palacio said, referring to a globally agreed goal to cut the emission of greenhouse gases.