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Thursday, December 7, 2023
CARACAS, Mar 12 1998 (IPS) - President of Venezuela, Rafael Caldera, said the nation is a firm defender of OPEC and is not responsible for the slump in oil prices on the world market.
Giving his fourth and last annual report to Congress, Caldera called for “calm and firmness” from the Organisation of Petrol Exporting Countries (OPEC) in confronting the crisis created by a crude price more than five dollars lower than its 1997 average.
The fall in the price of oil has set Venezuela at loggerheads with Saudi Arabia, the main world oil exporter, which is accusing the nation of playing the lead role in the crisis with its open rebellion against the organisation quota system.
Caldera described his stance on the oil crisis in a long introduction to his 1997 budget report, one of his few public declarations on the problem since prices started their downward movement in January.
The leader stated the drop in oil prices was no “real tragedy” for Venezuela, not like it had been before, as the economy has mechanisms to deal with the large drop in forecast income.
Oil contributes 40 percent of the budget, 23 percent of the national product and 77 percent of hard currency income in the country, and every dollar off the price of an export barrel means 1.2 billion dollars off national income in annual terms.
The average price of a barrel of Venezuelan crude so far this year has been 12.3 dollars, when initial forecasts expected prices of 15.5 dollars with the target dropped to 14 dollars in February.
Caldera warned the large consumers that a price debacle “is meaningless” as it forces some producers to sell at less than the cost of extraction, which generates a situation which in previous slumps, like those of 1986 and 1988, always pushed prices back up to excessive levels.
The president stated the drop in prices “cannot be attributed to the fact Venezuela produces above the limits the present OPEC quota system is trying to impose with untimely rigidity.”
Since 1996, Venezuela has been carrying out an intensive production expansion plan, with investments of 60 billion dollars aiming at increasing its production capacity to six million barrels per day in 2006, under the premise that several other agents will have withdrawn from the market by that time.
The productive capacity of the country today is around 3.7 million barrels per day and its real extraction rate is some 3.45 million barrels of crude, a figure which could increase to some 200,000 additional barrels before the end of the year.
The OPEC quota for Venezuela for the present half year is around 2.58 million barrels of crude per day, within a collective limit of 27.5 million.
A report released this week by the International Energy Agency indicates that real production in OPEC exceeds 28 million barrels.
Caldera said in Congress that Venezuela “will remain firm” in its stance of not reducing production, stating that the fall in production of one or several exporters “creates a space which is immediately filled by others, members or non-members of the organisation.”
Furthermore, he stated Venezuela has the advantage of all its production being places within mid-term agreements and an extraction cost of slightly more than two dollars “whereby it has ample room for manoevre to resist the moves of the market manipulators.”
“We were founders of OPEC” in September 1960 “and we have defended it in all circumstances,” said the 82 year-old president, who governed the country from 1969 and 1974, returning to power in February 1994.
But Caldera stressed OPEC no longer controls the market because it produces only 28 million of the 75 million barrels pumped onto the market each day.
According to him, OPEC still has influence over the market, but it would be unreal to think a reduction of some hundreds of thousands of barrels of production would suffice for “prices to rise automatically.”
He suggested the organisation should carry out an immediate in depth study of world energy consumption prospects, the climate change issue and other aspects affecting the energy sector and which require a strategic response from OPEC.
He recalled that Venezuela had proposed a meeting of OPEC and independent producers in February to “harmonise productive plans” to benefit producers and consumers alike.
Caldera said Venezuela was not hoping for prices that were too high, like those of the seventies, but the further they fall the more unbalanced the following rise will be, and this should be taken into account by the big consumers.
In February, the government had to cut back the 1998 budget by 1.4 billion dolars to 20.5 billion, following the drop in per barrel price from 15.5 to 14 dollars.
Planning Minister Teodoro Petkoff, said Thursday, that no new adjustment is foreseen despite the further fall, but that action is being taken to balance the budget by obtaining income from other sources.
The Venezuelan export barrel stood at 10.7 dollars Thursday, at the lowest level since 1988 and close to the lowest point ever, of less than nine dollars in 1986.
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