BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

The BBC's Jonathan Charles
"Opec is unrepentant"
 real 56k

The BBC's Andrew Walker
"The group's member countries are well aware how badly their decision will go down"
 real 28k

Saturday, 17 March, 2001, 18:34 GMT
US frowns on Opec cut
Opec secretary general Ali Rodriguez
Opec Secretary General Ali Rodriguez breaks the news
The United States has expressed disappointment at Opec's decision to cut oil output by one million barrels a day in an attempt to drive up prices.

US Energy secretary Spencer Abraham said the decision underlined the need to step up American oil production.

Opec's decision demonstrates the importance of increasing America's domestic production and developing a national energy policy

Spencer Abraham
Opec energy ministers announced their decision, which will come into effect from 1 April, at an Opec meeting in Vienna on Saturday

Mr Abraham said: "Opec's decision demonstrates the importance of increasing America's domestic production and developing a national energy policy that will ensure a stable, reliable, affordable and diverse energy supply."

An Opec statement had earlier stated: "The conference has taken the decision to stabilise the market. The present weak world economy and the traditional downturn in demand... both clearly point to a need for a correction."

Close monitoring

The 11-member grouping added that it would monitor the market closely, and would take "immediate" further action if necessary.

This is a good price for both producers and consumer

Opec Secretary General Ali Rodriguez
A reduction of one million barrels a day represents a 4% cut in Opec output - the cartel pumps 40% of the world's oil.

The production cut comes despite warnings by analysts that a substantial reduction in oil supply could cause a world recession, with both industry and consumers suffering under higher prices.

Some oil ministers had demanded an even bigger cut, but Opec countries were under huge political pressure not to go any further.

Mr Abraham noted that President George W. Bush wanted to increase US energy security by reducing reliance on imported oil.

Added taxes

Opec Secretary General Ali Rodriguez downplayed concerns that a larger-than-expected cut would hurt consumers and industrialised countries by pushing up crude prices.

"This is a good price for both producers and consumers," he said.

Oil rig
Oil prices have tumbled from a high of $35 last year
Opec's Algerian president Chakib Khelil meanwhile renewed the cartel's criticism of governments for levying high taxes, while blaming Opec for the price of end products like petrol.

"Consumers do not pay only the cost of crude oil. They pay also the cost of taxes, and taxes are a heavy burden on the citizens of the EU and the US and other countries," he said.

Oil prices have remained relatively low, despite the prospect of a cut in supplies.

But analysts say there is a good chance that this latest deal will do what Opec wants, adding two or three dollars a barrel to the price of crude oil over the next few months.

Protecting revenues

The cartel is anxious to protect the revenues of its member governments.

Only two years ago, they were struggling with oil prices at less than half their current level.

And prices have fallen more than 25% since touching a 10-year high - above $35 a barrel - late last year.

It is also an important issue for many oil importing countries outside Opec.

Several sent delegates to the meeting, including Mexico, Kazakhstan and Angola.

Russia was also represented. Its recovery after the financial crisis of 1998 owes a great deal to the relatively high oil price of the last year.

Search BBC News Online

Advanced search options
Launch console
See also:

14 Mar 01 | Business
Oil weak ahead of Opec meeting
09 Feb 01 | Business
Oil climbs over $30 a barrel
10 Oct 00 | Business
Oil demand warning
18 Oct 00 | Business
Only in the oil market...
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories