Ramirez did not specify the proposed price increase, because that request must generate consensus among OPEC members, but he tied the increase to this year sMessage 1 of 1 , May 29, 2004View SourceRamirez did not specify the proposed price increase, because that request must generate consensus among OPEC members, but he tied the increase to this years devaluation of the dollar with respect to the Euro.
Energy & Mines Minister Ramirez: Venezuela will seek an increase in the oil price range
VENPRES Judith Gonzalez reports: Energy & Mines Minister Rafael Ramirez has stated that Venezuela will seek an increase in the oil price range -- currently between US$22 and $28 per barrel -- at the meeting of the Organization of Petroleum Exporting Countries (OPEC) next week when Venezuela will also seek to define policies on overproduction, such as the production ceiling.
OPEC members will meet in Beirut on June 3 to decide on production and oil prices in moments when the price crude has reached historic levels and oil consuming countries are pressuring producers to increase output.
- With respect to price levels, Ramirez told VENPRES that Venezuela is aware that $40 per barrel is a high price. However, thats not exactly the true value of crude.
This year, the dollar, which is the currency that is used to pay for oil, is worth 25% less than it was last December because the value of the dollar has declined against the Euro. That is to say, $40 per barrel for the petroleum referred signifies a real price of $35. And if they bought our oil with the dollar of the 1980s, a barrel of oil would cost $11.
Asked if the percentage decrease in the value of the dollar would be the price increase that Venezuela would seek, Ramirez answered, That could be. Were preparing a number of technical studies involving other OPEC countries to decide at the highest levels and reach an agreement.
The Energy Minister also asserted that any increase in production must be passed with ample support from the other OPEC members, and he believes that what will happen with respect to production is that OPEC will make overproduction official and set a new production limit.
The OPEC production limit is 23.5 million barrels per day, but theres an unauthorized overproduction in the market of more than 2.5 million barrels. Our proposal is that this level be declared the official limit, without any further production increases, explained Ramirez.
According to Ramirez, the current increase in oil prices is not due to shortfalls in production, but rather is due to destabilization caused by the invasion of Iraq, which previously produced 2.5 million barrels per day, and today has trouble putting 1.6 million barrels on the market. Other factors contributing to higher oil prices include speculative investments encompassed in 80,000 futures contracts, and lack of refinery capacity in the United States needed to produce gasoline and other oil derivatives.
Were sure that the solution to higher prices has much to do with solving the conflict in Iraq, the de-occupation of that country by the invasion forces, and an increase in oil refinery capacity in the United States, where Venezuela could play an important role, concluded Ramirez.