Opec Issues Warning On Bush Oil Pledge

The Organisation of the Petroleum Exporting Countries warned that President George W. Bush’s proposal to reduce US dependence on Middle Eastern oil could badly jeopardise needed investment in Gulf oil production and refining capacity. Opec delegates and officials said the group planned to make this point in its as yet unpublished commentary in the cartel’s January bulletin next week. Speaking after President Bush’s Tuesday night State of the Union address, Edmund Daukoru, Nigeria’s energy minister and president of Opec, said: “We do believe that energy issues cannot be handled in a unilateral way; we all have to work together towards global energy security.”Privately, Opec officials were more direct in warnings about President Bush’s declared intention to reduce America’s dependence on Middle East oil by 75 per cent by 2025. But they emphasised Opec would avoid a confrontational tone in its commentary. An Opec delegate said: “Comments like that are unrealistic. Everyone knows the world will continue to depend on Middle East imports.” The organisation would raise concerns about such statements damping investment at meetings with the European Union and other organisations “more aligned with Opec’s view”. Opec’s concern was shared widely across the industry. John Felmy, chief economist of the American Petroleum Institute, which represents the US oil and gas industry, said: “If one of your big customers tells you they do not want to buy from you in the future, then of course this will impact how much you invest.” The International Energy Agency, the industrialised countries’ energy watchdog, forecast the Middle East will have to invest heavily to ensure the world’s energy thirst is satisfied. Martin Bartenstein, economics minister of Austria, which holds the EU presidency, said the Middle East, with two-thirds of the world’s oil reserves, would become more rather than less important. He told the FT: “As the person responsible for EU energy policies, I would not see myself in a position of talking about such a significant decrease in demand from a certain region. We know that the oil import dependency of the EU will ever increase, not decrease.” He added: “Everyone . . . will have to deal with oil and gas, especially from the Middle East.” Worries over the stability of Iran drove the oil price up 83 cents to $68.75 a barrel in midday trading in New York. Opec delegates and Mr Bartenstein place responsibility for oil price volatility mainly on consuming countries that have failed adequately to invest in refineries and pipelines needed to get oil to their consumers. Mr Felmy said shifting oil imports from the Middle East could be costly for America. “As long as America has a diversified range of oil suppliers it has a lot of security of supply. If you reduce this diversification it could be costly.” About 20 per cent of oil sold to the US comes from the Middle East, with Canada and Mexico supplying more than 30 per cent of imports. Any decrease in the US dependence on oil from the Middle East could only really be achieved by a decrease in its dependence on all foreign oil – either by conservation, alternative energy or domestically produced oil and gas, analysts said.