Published September 21, 2002
OSAKA, Japan – After OPEC upset Western nations by deciding not to increase oil output, U.S. Energy Secretary Spencer Abraham warned Saturday that high prices and volatile markets will harm everybody in the long run.
Abraham's comments came at an oil forum where oil exporters and importers argued over supplies, prices and politics.
Saturday's meetings were dominated by the West's disappointment about OPEC's decision this week to hold oil output steady even though prices have been nudging toward $30 per barrel. Nations that import oil fear such prices will hinder their chances for an economic recovery.
OPEC ministers say there is no need to cut production, insisting prices are high because of fears that President Bush will attack Iraq to topple President Saddam Hussein.
Asked about the OPEC decision, Abraham refused to comment. But he said volatile oil markets are damaging to all, noting that oil has bounced between $10 and $35 per barrel within the past four years.
"I cannot predict when the price will slide again, but I can say with certainty that it will slide," Abraham told the International Energy Forum. "High prices may be pleasing to producers in the short term, but in the long term, volatile pricing regimes of this kind are destabilizing and harmful to all participants in the market."
If prices get too high and stay there, the situation "will lead, sooner rather than later, to the result net-producing nations want least: early discovery of a permanent, low-price alternative," Abraham said.
Japan questioned whether the world can count on a stable oil supply from the politically volatile Middle East, drawing a sharp response from Saudi Arabia.
Japanese Economy and Trade Minister Takeo Hiranuma warned of an "increased instability of secure oil supplies" from the region that holds the world's biggest proven petroleum reserves -- and has been rattled by war worries.
"Perceived dangers of reliance on Middle East oil are manifestations of either confusion or outright misinformation," Saudi oil minister Ali Naimi said.
"Some still cast doubt on the dependability of our region as a source of reliable supply to the world," Naimi said, adding that "recent world events and oil market conditions have seemed to create some confusion."
The United States and other developed nations that depend heavily on oil imports had hoped the Organization of Petroleum Exporting Countries would pump more crude and bring prices down. But OPEC decided this week to leave its official supply ceiling unchanged at 21.7 million barrels per day.
OPEC insists that the market is well supplied, and many of its ministers say the price has been jacked up by $2 to $4 by the war fears.
"The price is high, but it is political," said Qatari oil minister Abdullah bin Hamad al-Attiyah, who serves as OPEC's president. Al-Attiyah said he has asked Qatar's oil customers if they need more crude, and nobody wanted any.
"How do you blame me for the price?" he said to The Associated Press. "I never said I wanted $30."
Naimi said bringing "a just and durable peace" to the Middle East would stabilize markets and ensure that Saudi Arabia would maintain its role as the world's top oil producer and exporter.
The International Energy Forum is held every two years to promote dialogue between buyers and sellers, but also hightlighted differences that will not be narrowed easily.
The European Union's energy commissioner said Saturday she would like to see oil at $20 per barrel because the current price is harming the world economy, but she also took a conciliatory stance.
"The positive aspect is they have clearly established that there is not going to be any shortage," Loyola de Palacio told Dow Jones Newswires.
Major exporter Norway played down expectations for any breakthrough between buyers and sellers in the three-day conference.
"This is a long-term process, but I think we are on the right track," Norwegian Oil Minister Einar Steensnaes said.