Energy agency poised for price talks with EU

Date: 28/02/02

By Maria Kielmas

EVER since the mid-1980s oil price slump, the Organization of Petroleum Exporting Countries (OPEC) has called for a dialogue between oil-producing and consuming countries to ensure price stability and secure supplies. Its pleas fell on deaf ears initially in the consuming countries but now both the International Energy Agency (IEA) and the EU want to talk.

Commission Vice-President Loyola de Palacio recently said such discussions would ensure stable prices, suggesting €22 per barrel was a fair level. Arne Walther, chairman of the IEA governing board, told a January meeting in Abu Dhabi that the interests of oil producers and consumers are converging.

Numerous oil industry calculations show that EU consumers pay around €110 per barrel for oil products even though the current international crude price is about €22.

OPEC claims that consuming country governments make twice as much from taxing refined products as the cartel does from selling the crude.

So what has the EU consumer to gain from this dialogue? Will fuel prices fall if the Commission listens to OPEC?

Commission officials are reluctant to enlarge on what they term a 'sensitive' issue. So far this dialogue consists merely of informal meetings, they say.

An IEA spokesman acknowledged oil producers and consumers have separate objectives but the dialogue is 'bridging exercise' and good for 'market transparency'.

The Energy Charter Treaty, a ten-year-old intergovernmental entity to promote east-west cooperation in energy trade and investment, started as a similar bridging exercise.

The ECT's senior expert in Brussels, Karl Petter Waern, says the treaty benefits the consumer by reducing the political risks which could increase business costs.

This did not dissuade Russia, an ECT signatory, from agreeing to OPEC attempts by cutting oil exports by 150,000 barrels per day.

Fortunately this equals average export reduction due to winter weather delays at Russian ports. It helps to talk.

Article is part of a survey on energy.