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Opec leader fans flames of Jeddah showdown

Discussion in 'Jukwaa la Siasa' started by BAK, Jun 21, 2008.

  1. BAK

    BAK JF-Expert Member

    Jun 21, 2008
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    Opec leader fans flames of Jeddah showdown

    Larry Elliott and Jon Watts
    The Guardian, Saturday June 21, 2008

    Crude prices rose sharply on the world's commodity markets last night after the head of Opec dismissed as "irrational and illogical" a call by Gordon Brown for the producers' cartel to pump more oil.

    Chakib Khelil said the near-doubling of prices over the past year was due to geopolitical tension, speculation and a shortage of refining capacity rather than failure by producers to supply enough crude.

    His comments came as the prime minister flew to Saudi Arabia for a summit meeting tomorrow of oil producers and consumers in Jeddah at which he will press for Opec to help contain rising inflation in the west by pumping more oil.

    Rising petrol and domestic energy costs are blamed by the government for pushing the cost of living in Britain to a 16-year high of 3.3%.

    Khelil told Algeria's official news agency APS: "Asking Opec member countries to increase their offer is illogical and irrational." Also the energy and mining minister for Algeria, he ruled out a quota increase by Opec and said Saudi's unilateral decision to raise production would have no impact on world crude prices.

    He suggested there would be no decision by Opec as a cartel at the meeting.

    "I'm invited as Algeria's energy and mining minister. So, I have no Opec mandate," he said. Commenting on reports that the Saudis were willing to lift production to the highest level since 1981, Khelil said it would have no effect on the global price of crude. "The barrel is always at $136. I do not believe that is the problem."

    Oil rose by more than $4 a barrel yesterday as dealers reassessed their view about a fuel price increase in China, announced this week. After a $5 fall on Thursday, speculation that Chinese demand might rise pushed the price of US and Brent crude above $136 a barrel, against a record of just under $140 a barrel earlier in the week.

    Société Générale analyst Mike Wittner added: "We think, if anything, the Chinese price rise would increase consumption."

    Analysts, who expressed scepticism about the likely outcome of the summit, said crude prices also rose as a result of attacks on oil installations by militants in Nigeria and amid fear of a military conflict between Israel and Iran.

    "Traders don't want to be short going into the weekend. There are just too many hot spots around the world ," said Gerard Rigby of Fuel First Consulting in Sydney.

    As Chinese motorists queued and complained at the pumps, economists warned Thursday night's 18% increase would heighten the risk of inflation, already near a 12-year high.

    But environmentalists expressed hope the rising cost of fuel may force the world's second-biggest oil consumer to improve energy efficiency and encourage new car buyers to consider greener models. China, once famed for its bicycles, is now one of the world's fastest-growing car markets.

    The government has long capped domestic fuel costs to ensure social stability. Inflation has risen in the past year, particularly in the food sector and, after holding firm for eight months, the government was forced to lift prices under pressure from state-owned oil companies, which have lost a fortune by selling petrol at a loss, and from foreign governments which argue subsidised Chinese fuel is keeping global prices high.

    Many drivers were furious. In the hours before the price rise, police were sent to several petrol stations to maintain order.

    There were no reports of violence but motorists expressed disappointment. Li Lianyou, a taxi driver queuing for petrol in west Beijing, said the price rise would hurt unless compensation is ramped up.

    "I lose about 500 yuan (£37) every month. Where I once could afford to eat meat three times a day, now it is only once a month," he said.