OPEC talks of raising oil target price 30%

Dollar's decline noted by president of cartel

April 28, 2004|By BLOOMBERG NEWS

OPEC, which pumps a third of the world's crude oil, may raise its target price by 30 percent because the decline in the value of the dollar has reduced purchasing power in member states, the group's president said yesterday.

The Organization of the Petroleum Exporting Countries is studying whether to increase its 4-year-old price band of $22 to $28 a barrel, Purnomo Yusgiantoro said. Some OPEC members "think an increase in the price band won't hurt the world economy," OPEC President Purnomo, who is also Indonesia's oil minister, said in Jakarta.

OPEC "thinks oil at $32 to $34 a barrel is considered safe. Some members have asked for a new price band to take into account dollar depreciation and world inflation," he said.

Purnomo's statement came as Federal Reserve Chairman Alan Greenspan told a conference in Washington that oil and natural gas price futures suggest energy prices will remain persistently high and and have begun affecting businesses' investment decisions.

"These elevated long-term prices, if sustained, could alter the magnitude of and manner in which the United States consumes energy," Greenspan told the Center for Strategic International Studies conference on U.S.-Saudi relations and global energy security.

A shift in expectations, to a belief that prices will remain elevated, "has been substantial enough and persistent enough to influence business investment decisions," he said, "especially for facilities that require large quantities of natural gas."

Higher energy costs are likely to spur more progress on reducing use, even as advances help find new energy reserves and lower the cost of extracting them, Greenspan said.

The Fed chairman said more must be done to make natural gas available in North America, particularly expanding imports of liquid natural gas. "Clearly, the gas trade has a long way to go," Greenspan said.

"If North American natural gas markets are to function with the flexibility exhibited by oil, more extensive access to the vast world reserves of gas is required."

The International Energy Agency, an adviser to 26 oil-consuming countries, has said that prices at current levels through the end of this year will cut world economic growth by about half a percentage point.

Purnomo's declaration may split the 11-member OPEC as Saudi Arabia, the world's largest oil exporter, remains committed to $25 a barrel. Oil officials from Iran, Venezuela and Nigeria, three of the group's top five producers, have said they want higher prices.

"I don't believe there is a fissure," the Saudi oil minister, Ali al-Naimi, said yesterday at the Washington conference where Greenspan spoke.

"There is a debate," he said. "In OPEC there are hawks, there are doves, there are moderates. Saudi Arabia is a moderate."

New York's benchmark light sweet crude contract for delivery in June surged 56 cents to $37.53 a barrel yesterday.

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