COMMODITIES: Venezuela Wants OPEC Quotas Revised

By Humberto Márquez Reprint | | Print |

Humberto Marquez

CARACAS, Sep 5 1996 (IPS) - The flush of oil price rises following the US attack on Iraq led Venezuela to suggest, once again, that the Organisation of Petroleum Exporting Countries (OPEC) revise its quota system.

“OPEC must consider whether to increase the production quota according to demand,” said Venezuela’s energy minister, Erwin Arrieta, stressing this had also been nation’s stance during the organisation conference in July.

Arrieta said “while OPEP production remains low, not making the most of the markets, other producers from outside the organisation are taking them over.”

Since 1993, the OPEC has had a collective ceiling of 24.52 million barrels per day, and this was increased to 25.03 million in June, to allow for the Iraqi return to the market – meaning the quotas of the other members remained the same.

Venezuela is allotted 9.42 percent of this, or some 2.359 million barrels per day, though its potential is more like 3.179 million.

Although unofficial sources claim there is overproduction of up to 400,000 barrels per day, Venezuela keeps part of its extraction capacity in check.

Meanwhile, to feed its refineries in the United States and Europe, the State-owned Venezuelan Petroleum (PDVSA) must buy up to 700,000 barrels per day of crude oil from other sources.

In June, Venezuela proposed that liquid hydrocarbons aimed at its domestic market, some 278,000 barrels per day, should be excluded from the quota, but this suggestion was rejected.

Now Venezuela has come back with its theory that, in order to prosper, the OPEC offer must reach production of more than 27 million barrels per day – more than a third of the world demand of 73 million barrels per day.

The demand is increasing with the growth of the world economy, at over three percent, said Venezuela’s former oil minister and OPEC and PDVSA president in the eighties, Humberto Calderon.

This growth was encouraged by stable, moderate energy prices following the Gulf War in 1990-91, and explains the anxiousness of the oil buyers to know when Iraq will rejoin the market.

This was not expected to occur in September anyway, but the whole issue was suspended after the United States fired missiles into Iraq this week.

Iraq is currently suffering from a ban on its oil exports, imposed by the UN Security Council, which decided to suspend the embargo in the second half of 1996 in order to allow Baghdad to make some two billion dollars, by selling between 700,000 and 750,000 barrels of crude per day.

The unknown factor the oil operators want to clarify now is how long the Security Council ban on Iraq will be kept up, a decision which has been further complicated following the divisions created within this organism by the US military action.

Calderon, who has been advisor to private and State corporations in the Gulf, said “the critical position of France has a logical explanation: they want Iraq back in the market because they have large investments in the country.”

He is in the uncomfortable position of falling between the two benches who call for the nation to either remain in, or withdraw from OPEC, calling for cost benefit analysis, and supporting the official position of asking for increased production.

“An OPEC decision on the issue of increasing production above the ceiling is correct, and aims to deal with the increased demand for oil,” he said.

Calderon said the current conflict between Baghdad and Washington “will not be on large-scale, because it does not have worldwide approval,” adding that oil prices will stabilise in the last quarter of the year.

Following an entire year, and a northern summer, with unusually good prices for exporters, OPEC reached its aim of 21 dollars per barrel after the missiles of the world’s biggest oil consumer, the United States, fell on one of its associates.

On Wednesday, the OPEC basket of seven crudes was selling at 21.43 dollars per 159 litre barrel, with an annual average of 19.05 dollars. The Venezuelan oil basket reached 20.12 dollars, at an average of 17.19 so far this year.

“We are not happy, because this situation was reached through military action, with the spilling of blood,” said Arrieta, and what Venezuela wants is “oil prices to become stronger within a peaceful panorama.”

Each dollar extra on the price of a barrel of oil means an additional annual 800 million dollars for Venezuela, and Calderon said 2.5 billion dollars more than the 15 billion calculated in January could be earned.

Arrieta said any extra money above 14.7 dollars per barrel, should be diverted into a fund to pay the foreign debt, and planning minister, Teodoro Petkoff, said the additional resources will not enter the “circulating torrent” of money within the nation.

In April, Venezuela started its second macroeconomic adjustment in seven years, with a mixture of devaluation, price increases and higher taxes, which destroyed the buying power of the population, but Petkoff said oil income would not be used to deal with domestic problems.