High hopes on OPEC summit in Caracas

High hopes on OPEC summit in Caracas

By Emilio Rappold

CARACAS (DPA): "They are all just a heap of Pinocchios," a former Venezuelan oil minister said of his OPEC colleagues.

They had a tendency to set oil-production quotas at OPEC meetings on Sept. 27-28, then turn around and produce well above those levels. The resulting lower oil prices, together with the world's decreasing dependence on oil, combined to drive the Organization for Oil Exporting Countries (OPEC) into obscurity after the energy crises of the 1970s.

However, shortly before last week's OPEC summit, the second in the cartel's 40-year history, surging world oil prices have put OPEC once again in the world's spotlight, a position it hopes to cement at its meeting Wednesday and Thursday in Venezuela's capital.

Current price developments are expected to be discussed only on the fringes of this week's summit because the meeting is seen, instead, as an opportunity -- in the words of Venezuelan President and "summit father" Hugo Chavez -- for this heap of Pinocchios to establish "true unity and importance".

Chavez, a former putschist and left-leaning nationalist who regularly campaigns against "wild capitalism", envisions OPEC unity as transcending oil production and extending to relations between OPEC members.

At the summit, Chavez said he would like OPEC to take a stand "against embargoes of all kinds and against the one-sided mixing in internal affairs of other countries". However, he has also called for OPEC to support the Palestinians.

He also wants OPEC to begin discussions on alternative energy sources.

This week's summit will also present an opportunity for OPEC to grow beyond its current 11 members. Brazil has announced that it wants to join at the latest by 2010. It -- along with Russia, Mexico and Norway -- will attend the summit as observers, and Russia is also expected to announce, possibly in Caracas, its intentions to join soon, said summit organizer Jorge Valero, Venezuela's deputy foreign minister.

But Chavez's vision of an OPEC that remains politically powerful through oil-price fluctuations might be more than wishful thinking.

Its share of world oil production has fallen from two-thirds in the 1970s to 40 percent today, and conflicts between OPEC countries, like Iraq and Kuwait and Iraq and Iran, have received a lot of press.

In addition, OPEC has to not only shake loose of its Pinocchio image but also of its "bad boy" stereotype left over from the 1970s, when it imposed embargoes and price increases -- some as large as 70 percent and 130 percent -- aimed at Israel's Western supporters.

OPEC has rejected the recent accusations, warnings and protests directed at it over rising oil prices. OPEC President and Venezuelan Energy Minister Ali Rodriguez said recently that it is the least responsible for price hikes that have driven oil prices up from US$15 per barrel in mid-1999 to last week's 38 dollars a barrel.

He said recent market speculation alone had increased the price by $8 per barrel. He also pointed his finger at high national taxes on petroleum, transportation and refinery problems.

Rodriguez added, however, that OPEC couldn't rule out another production increase of 500,000 barrels per day. That increase could be decided upon at OPEC's November meeting "if the price doesn't sink within the wished-for range of $22 to $28 (per barrel) for at least 20 days in a row", he said.

He said OPEC wants to avoid a price war and that he was convinced that oil prices would drop in October, when an additional 800,000 barrels per day will hit the market as a result of OPEC's decision two weeks ago to increase its production.

However, the agenda for the nine heads of state at the summit -- Iraq's Saddam Hussein and Libya's Muammar Qaddafi will not attend on "security grounds -- will not be current price developments, rather the laying of a cornerstone for "long-term stable and fair prices", Valero said.

OPEC has yet to produce any concrete suggestions for achieving that aim, along with Chavez's vision of OPEC's transformation into a global powerbroker. And unlike Pinocchio, it will to do more than wish upon a star.