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OPEC: Not At Fault for High Fuel Prices

Posted on May 26, 2004 by LCT Staff - Also by this author - About the author

LONDON – The president of the Organization of the Petroleum Exporting Countries said that there was little the group could do to lower fuel prices anytime soon, because OPEC's oil production quotas were not the problem.

His remarks contradicted statements made by Saudi Arabian officials, the cartel's leading producer, calling for increases in quotas to ease price pressures.

Purnomo Yusgiantoro, cartel president and the energy minister of Indonesia, said that the recent sharp rise in retail gas prices and other fuels was "due to factors beyond OPEC's scope."

Purnomo said that speculation, geopolitics, taxes and other problems in the United States gasoline market were to blame for the rampant increase in pump prices in America.

No matter what OPEC decides to do, there is little or no chance of relief in June, because tankers used to carry crude oil to market are already booked for the month and no more are available.

Other oil experts said Purnomo's assessment of OPEC's ability to affect prices were a mixture of political posturing and fact.

Purnomo said, "The price today is a high price, and we want it to be lower.” But it would be very difficult for OPEC to overcome high prices by itself, he said, because pumping more crude would not address shortages in refinery capacity and other problems.

As the political climate in the U.S. heats up prior to the November elections, fuel prices are becoming a significant issue, with pressure mounting on the Bush administration to either tap the strategic petroleum reserve or get OPEC to produce more oil.

Seven state attorneys general have sent letters to President Bush, asking him to urge Attorney General John Ashcroft to join them in investigating whether oil and gas companies and OPEC are colluding to drive up prices.

The 11 members of OPEC produce about one-third of the world's oil supply. Iraq is a member, but it has not been included in quota agreements since it invaded Kuwait in 1990. Policy makers who had hoped that production in Iraq would revive and help bring down world prices have been disappointed. Though sanctions on Iraq were lifted after the United States-led invasion in March, persistent sabotage has held down the amount of oil the country has been able to ship.

At the root of the global problem, Purnomo said, is global demand for oil that is far outrunning forecasts.

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