How Opec came back to haunt the west

Record demand and tighter supply have sent oil prices soaring but, unlike in the 70s, the producers may back down

Brian Whitaker and Larry Elliott
Friday September 8, 2000
The Guardian

Bill Clinton's message to crown prince Abdullah of Saudi Arabia was brief and to the point when they met yesterday. Unless the world's biggest oil producer shook some sense into the militant members of the Opec cartel, there was a risk of plunging the world economy into recession.

This week's Millennium Summit in New York has been the ideal time for some diplomatic arm-twisting, and the outgoing US president has taken full opportunity of the presence of 189 world leaders to spell out to the Saudis the consequences of turning up the heat on the big industrialised economies.

With rising energy costs casting a shadow over Al Gore's election hopes, halting the relentless rise in the oil price to its highest level in 10 years has become a key policy objective in Washington. Nor did Mr Clinton need to look very far for a world leader to support him. Jacques Chirac was also at the United Nations summit to give a first-hand account of how France is grinding to a halt as a result of the protests at rising petrol prices.

After years in the doldrums, Opec has now grabbed centre-stage once more. It is 27 years since the 11-nation cartel first came to public notice when its response to Israeli victories in the Yom Kippur war was to increase oil prices fivefold, triggering a period of stagflation - rising prices and lengthening dole queues - in the west.

Over the past 18 months it has again been flexing its muscles, agreeing to curb production as world demand for oil rises. As motorists have found to their cost, the result has been a sharp increase in petrol prices at the pump.

Prince Abdullah probably did not take much persuading at his meeting with Mr Clinton. The Saudis are well aware that a downturn in the west could cause a collapse in the oil price. Even so, they are likely to get some flak from other Opec members at the cartel's meeting in Vienna on Sunday, who say that the oil producers are being unfairly criticised for a problem caused by higher fuel taxes and refinery bottlenecks in the west.

A chart on its website headed "The rip-off race" cheekily compares the prices of a barrel of oil, a barrel of Coca Cola and a barrel of Perrier water. Needless to say, it shows that oil is a bargain, though perhaps less thirst-quenching.

Today, Opec has more muscle than ever before - at least in theory. Its share of worldwide production has increased from 36% to 41% over the last 10 years, and its share of proven reserves has increased from 67% to 78%. This trend, in the view of some analysts, is likely to continue.

But Opec's ability to use this muscle is limited because its members - Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela - have divergent interests and its decisions have to be based on consensus.

Oil-producing countries range from those which can barely produce enough for their own needs to those which are almost totally dependent on oil for their foreign exchange earnings.

Dependent

The most dependent countries benefit from high prices but also need price stability. Drastic changes, up or down, hamper longer-term development and can mean re-drafting the national budget at short notice. Besides the Opec countries, Russia, Kazakhstan, Azerbaijan, Yemen, Oman and Mexico fall into this category.

Julian Lee, analyst at the London-based Centre for Global Energy Studies, said yesterday that Sunday's discussions will not be about whether a production increase is needed, but by how much.

"It is all but certain that the situation will trigger an increase of 500,000 barrels a day, which will be fairly generally accepted," he said. "But Saudi Arabia will push for a bigger increase - because it sees this as being in its own long-term interests and those of Opec generally."

The Saudis are well-placed to do this because they hold about two-thirds of Opec's spare capacity which is estimated at 3m barrels a day. The Saudis would to some extent be shielded from a fall in oil prices by revenue from their extra production.

But other Opec countries - Algeria, Iran, Libya, Nigeria and Venezuela - would lose money as a result of lower prices because they have little spare capacity.

Venezuela, which currently holds the presidency of Opec, is at the forefront of the reluctant faction. At 3.1m barrels a day it is Latin America's largest producer - but almost totally dependent on oil. Each $1 drop in oil prices costs it about $1bn (£665m) a year.

Its charismatic president, Hugo Chavez, has called an Opec summit in Caracas for later this month, and argues that the real issue is not high prices, but fair prices.

"We understand that they [consumers] start to feel uneasy when crude oil prices reach $30 a barrel, but they can imagine how it must have been for us when it fell to $8," he said recently.

Coming at a critical moment in the Middle East peace process and in the midst of an American presidential election campaign, the argument over oil prices has acquired a political dimension.

The Americans have been shouting more loudly than usual, and the perception that this was motivated, at least in part, by the electoral needs of the Democrats caused some resentment.

Since then, the issue has been further complicated by American efforts to drum up support for its proposals on the Israeli-Palestinian issue. On the thorny question of Jerusalem, the Arab governments generally view the US as oversympathetic towards Israel. This is not a particularly good moment for Arab governments to be seen kow-towing to the Americans.

Any decision to increase production will also have a built-in assumption that existing supplies will continue unabated. But with low stockpiles around the world, consumers have no real cushion against disruption of supplies from less dependable sources such as Iraq, Nigeria, Colombia and Angola.

Clinton wins oil pledge

Saudis to raise production as revolt on prices brings France to a halt

Larry Elliott, Charlotte Denny and Jon Henley in Paris
Friday September 8, 2000
The Guardian

Bill Clinton last night won a pledge from the world's biggest oil producer, Saudi Arabia, to halt the relentless rise in the price of crude which yesterday brought France to a halt and prompted fears of a global recession.

As UK petrol firms responded to the 10-year-high in oil prices by putting up fuel prices by 2p a litre, crown prince Abdullah said Saudi Arabia would raise production by 700,000 barrels a day in an effort to ease pressure on the west.

However, oil experts said the 3% increase in output would not be enough to bring crude oil prices to below $30 a barrel and motoring organisations warned that British drivers could soon expect to pay £4 for a gallon of petrol.

Speaking at the UN millennium summit in New York, President Clinton said he had put pressure on Saudi Arabia to take action ahead of Sunday's meeting of Opec - the 11-member oil producers' cartel.

"I told him I was very concerned that the price of oil is too high, not just for America but for the world," said Mr Clinton after his meeting with the crown prince. "If it was to cause a recession in any part of the world that would hurt the oil producing countries."

Large parts of France ran out of fuel yesterday as hauliers and farmers, more determined than ever to win big fuel tax cuts from the government, continued their four-day blockade of oil refineries and depots.

Angry farmers, already active on most of the 120 blockades up and down the country, successfully blocked the entrance to the Channel tunnel with their tractors, triggering scuffles with British tourists.

Around 50 British holidaymakers mounted a counter-blockade by blocking a lane being used by the authorities to allow French cars to trickle past the barricades, and threatened to cut off the main A16 motorway if they were not allowed to get through the blockade and go home. Under police escort, a convoy of British cars and coaches was eventually allowed through in the late afternoon.

A British police sergeant, who was part of the convoy but asked not to be named, said: "It seems we managed to outmanoeuvre them with a bit of British courage and some cunning. We played them at their own game and it worked. In the end it was quite a fun victory for all."

Another convoy member, Frank Davidson, 49, said: "This was as sweet a victory as Wellington over Napoleon at Waterloo. They didn't like it when we put up a fight."

While talks resumed late in the afternoon between the French transport minister, Jean-Claude Gayssot, and the two main hauliers' federations, the government reiterated that it would go no further than the 15% tax cut, worth £100m, it offered on Wednesday. Meanwhile, the European commission threatened legal action if the free movement of goods within the EU was disrupted.

As the protest spread, the hauliers, farmers, ambulance drivers and coach firms were joined by thousands of taxi drivers in massed "go-slow" processions that brought traffic to a halt in a dozen cities and caused motorway tailbacks.

At least three regional airports reported they would be out of aviation fuel by this morning. Wholesalers at the main Rungis market outside Paris said supplies of fresh fruit and vegetable were beginning to be affected and 80% of the country's petrol stations were either dry, subject to rationing of £15 per vehicle, or had been requisitioned for emergency service use only.

In the financial markets yesterday, the price of a barrel of crude oil eased back from a peak of $34.50 to $33.91. However, dealers said that most of the Saudi production increase had been anticipated by the markets and that prices were not likely to fall markedly.

They said Saudi Arabia was the key player in the crisis because it was the only Opec nation with the spare capacity to pump the extra oil needed to bring prices under control. But it can expect opposition from other Opec members who are enjoying extra revenues from the price surge from under $10 a barrel at the start of last year.

Lawrence Eagles, oil analyst at the City firm GNI Securities, said a harsh winter could boost demand by an extra 500,000 barrels a day, pushing prices still higher."You can't rule out $40 a barrel if Opec aren't prepared to act," he said.

© Copyright Guardian Media Group plc. 2000

 

Appendix 3

Be prepared!

Five-year phase-in plan for "EuroEnglish"

The European Commission have just announced an agreement whereby English will be the official language of the EU, rather than German, which was the other possibility.

As part of the negotiations, Her Majesty's government conceded that English spelling had some room for improvement and has accepted a five-year phase in plan that would be known as "EuroEnglish".

In the first year, "s" will replace the soft "c". sertainly, this will make the sivil servants jump for joy. The hard "c" will be dropped in favour of the "k".

This should klear up konfusion and keyboards kan have 1 less letter.

There will be growing publik enthusiasm in the sekond year, when the troublesome "ph" will be replaced with the "f".

This will make words like "fotograf" 20% shorter. In the third year, publik akseptanse of the new spelling kan be expekted to reach the stage where more komplikated changes are possible. Governments will enkorage the removal of double letters, which have always ben a deterent to akurate speling. Also, al wil agre that the horible mes of the silent "e"s in the language is disgraseful, and they should go away.

By the 4th year, peopl wil be reseptiv to steps such as replasing "th" with "z" and "w" with "v".

During ze fifz year, ze unesesary "o" kan be dropd from vords kontaining "ou" and similar changes vud of kors be aplid to ozer kombinations of leters. After zis fifz year, ve vil hav a realy sensibl riten styl. zer vil be no mor trubls or difikultis and evrivun vil find it ezi to understand each ozer ZE DREAM VIL FINALI KUM TRU!

____________

 

------------ The English Language-----------------

There is no egg in eggplant, nor ham in hamburger; neither apple or pine in pineapple. And while no one knows what is in a hotdog, you can be pretty sure it isn't canine.

English muffins were not invented in England nor French fries in France.

Sweetmeats are candies, while sweetbreads, which aren't sweet, are meat.

We take English for granted. But if we explore its paradoxes, we find that quicksand can work slowly, boxing rings are square, and guinea pig is neither from Guinea nor is it a pig.

And why is it that writers write, but fingers don't fing, grocers don't groce, and hammers don't ham?

If the plural of tooth is teeth, why isn't the plural of booth, beeth? One goose, 2 geese. So one moose, two meese?

Is cheese the plural of choose? One mouse, 2 mice. One louse, 2 lice. One house, 2 hice?

If teachers taught, why didn't preachers praught?

If a vegetarian eats vegetables, what does a humanitarian eat?

Why do people recite at a play, and play at a recital?

Ship by truck or car and send cargo by ship? Have noses that run and feet that smell? Park on riveways and drive on parkways?

How can a slim chance and a fat chance be the same, while a wise man and a wise guy are opposites?

How can the weather be hot as heck one day and cold as heck another? When a house burns up, it burns down. You fill in a form by filling it out and an alarm clock goes off by going on. You get in and out of a car, yet you get on and off a bus. When the stars are out, they are visible, but when the lights are out, they are invisible.

And why, when I wind up my watch, I start it, but when I wind up this essay, I end it?

English is a silly language... it doesn't know if it is coming or going!!!

_______________________

 

Facts

=--=

It was the accepted practice in Babylon 4,000 years ago that for a month after

the wedding, the bride's father would supply his son-in-law with all the mead

he could drink. Mead is a honey beer, and because their calendar was lunar

based, this period was called the "honey month" or what we know today as the

"honeymoon."

In English pubs, ale is ordered by pints and quarts. So in old England, when

customers got unruly, the bartender would yell at them to mind their own pints

and quarts and settle down. It's where we get the phrase "mind your P's and

Q's."

___________

1.Make sure each pronoun agrees with their antecedent.

2.Just between you and I, the case of pronoun is important.

3.Watch out for irregular verbs which have crope into English.

4.Verbs has to agree in number with their subjects.

5.Don't use no double negatives.

6.Being bad grammar, a writer should not use dangling modifiers.

7.Join clauses good like a conjunction should.

8.A writer must be not shift your point of view.

9.About sentence fragments.

0.Don't use run-on sentences you got to punctuate them.

11.In letters essays and reports use commas to separate items in series.

12.Don't use commas, which are not necessary.

13.Parenthetical words however should be enclosed in commas.

14.Its important to use apostrophes right in everybodys writing.

15.Don't abbrev.

16.Check to see if you any words out.

17.In the case of a report, check to see that jargonwise, it's A-OK.

18.As far as incomplete constructions, they are wrong.

19.About repetition, the repetition of a word might be real effective repetition - take, for instance the repetition of Abraham Lincoln.

20.In my opinion, I think that an author when he is writing should definitely not get into the habit of making use of too many unnecessary words that he does not really need in order to put his message across.

21.Use parallel construction not only to be concise but also clarify.

22.It behooves us all to avoid archaic expressions.

23.Mixed metaphors are a pain in the neck and ought to be weeded out.

24.Consult the dictionery to avoid mispelings.

25.To ignorantly split an infinitive is a practice to religiously avoid.

26.Last but not least, lay off cliches.

George L. Trigg

___________________________________

 

Overworked!

=--=

For a couple years I've been blaming it on lack of sleep and too much pressure from my job, but now I found out the real reason:

I'm tired because I'm overworked.

The population of this country is 237 million.

104 million are retired.

That leaves 133 million to do the work.

There are 85 million in school, which leaves 48 million to do the work.

Of this there are 29 million employed by the federal government, leaving 19 million to do the work.

2.8 million are in the Armed Forces, which leaves 16.2 million to do the work.

Take from the total the 14,800,000 people who work for State and City Governments and that leaves 1.4 million to do the work.

At any given time there are 188,000 people in hospitals, leaving 1,212,000 to do the work.

Now, there are 1,211,998 people in prisons.

That leaves just two people to do the work.

You and me.

And you're sitting at your computer reading jokes.

______________

 

Top 13 Signs Your CAT is Planning to Kill You!

=--=

1.Seems mighty chummy with the dog all of a sudden.

2.Unexplained calls to F. Lee Bailey's 900 number on your bill.

3.He actually _does_ have your tongue.

4.You find a stash of "Feline of Fortune" magazines behind the couch.

5.Cyanide pawprints all over the house.

6.You wake up to find a bird's head in your bed.

7.As the wind blows over the grassy knoll in downtown Dallas, you get a faint whiff of catnip.

8.Droppings in litter box spell out "REDRUM."

9.Catch him with a new mohawk looking in the mirror saying, "Mew looking at me? Mew looking at me?"

10.Takes attentive notes every time "Itchy and Scratchy" are on.

11.You find blueprints for a Rube Goldgerg device that starts with a mouse chased into a hole and ends with flaming oil dumped on your bed.

12.Has taken a sudden interest in the wood chipper.

13.Ball of yarn playfully tied into a hangman's noose.

________________

Где-то на занятиях я такое уже слышал.