PETROLEUM: Nigeria to Press for ‘Reasonable’ Price at OPEC Meetings

By Toye Olori Reprint | | Print |

Toye Olori

LAGOS, Sep 6 2000 (IPS) - Nigeria will urge fellow member nations of the Organisation of Petroleum Exporting Countries (OPEC) to increase production dramat ically when the grouping meets in Vienna, Austria this weekend.

A source at the Ministry of Petroleum Resources in Abuja told IPS tha t President Olusegun Obasanjo is concerned that the current oil prices, if sustained, will harm not only Nigeria’s economy, but that of other developing countries and so will agitate for higher production rates to help low er global prices.

Obasanjo is expected to take the same message to the second meeting o f heads of governments of OPEC members to be held mid-month in Caracas, Venezuel a.

“For the first time, President Olusegun Obasanjo will be at the summ it to try to influence a reduction of the present high price of crude in the international market, which though favourable to a medium producer na tion like Nigeria, portends grave dangers to the economy in the long run,” the source told IPS by telephone.

Petroleum exports provide Nigeria with 95 percent of its annual forei gn exchange earnings. The government had designed this year’s budget u sing 18 dollars a barrel for oil as its base, but the price of petroleum has been inching up all year. Oil prices began this week at 32.46 dollars per barrel just above what many in the industry consider the already pricey figu re of 30 dollars a barrel.

Nigeria estimates it will earn 17.6 billion dollars from oil this yea r because of the current high price, an increase of about three billion dollars above government’s budget earlier projections.

“An excessively high price of oil is neither good for oil producers nor for oil consumers, particularly developing oil consumers. Neither is an excessively low price of oil good for oil producers nor oil consumers because you need a certain amount of stability,” the Nigerian leader said last month.

Petroleum industry analysts here agree with him. They note that conti nued high prices could seriously affect OPEC itself as industrialised countries would be forced to look for alternative sources of energy while non-OPEC oil producers – who already provide for 60 percent of world consumption – could begin to wield more power over global prices.

“Nigeria is a medium scale producer. High prices are good for the co untry in the short term but in the long run, it may be disadvantageous in that high oil prices force consuming nations to look for alternative sources of ene rgy and this will seriously affect the revenues of producing countries,” say s Tajudeen Adigun a petroleum industry analyst.

He advised Nigerian oil officials to push for a price of between 20 a nd 25 dollars per barrel which, he believes, is a reasonable price to dissu ade industrialised consuming nations from looking for alternative energy sources.

“OPEC has a responsibility to make sure oil prices are stable but no t necessarily at the price the consuming nations are asking for. It sho uld take the responsibility to control prices at a reasonable level so that it will remain in business for a long while,” Adigun said.

One such consuming nation came calling last month. US President Bill Clinton, during his official visit to Nigeria in August, urged Obasanjo to imp ress upon his OPEC colleagues the need for lower oil prices.

OPEC members have already increased production. In March this year th e organisation agreed to restore production to the level it was before cuts, which tripled the global price of petroleum, were made a year ago. Th e higher production put an additional 1.4 million barrels per day on the marke t.

And under its price band agreement OPEC should put another 500,000 ba rrels per day on the market if the price stays above 28 dollars for 20 working days.

But OPEC is not taking the blame for the high prices. Officials are i nstead blaming speculators, high oil consumption taxes and refinery bottlene cks.

Venezuelan Energy Minister, Ali Rodriguez, told journalists in Abuja after a meeting with the Nigerian leader, that OPEC was not responsible for t he increasing price of crude, noting that the organisation has increased oil output but the price has continued to rise.

“The price of oil is no longer a matter of supply in the world marke t, but the price of gasoline in the United States market. The problem is largely caused by the price of gas, which has a direct bearing on the price of petroleu m. The solution to the rising prices has gone beyond the scope of OPEC,” he said.