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Western Officials to Confer on OPEC, Energy Strategies

May 11, 1987|From Reuters

PARIS — Western governments will examine their defensive lines against OPEC's tightening grip on world oil markets 13 years after the cartel's first major price increase caused long lines at gasoline pumps, fuel rationing and world economic recession.

Ministers from the industrialized world will swap thoughts on their fears and hopes about world energy supplies at a one-day meeting today of the International Energy Agency, a body they created in 1974 when the oil price explosion stopped Western economic growth in its tracks.

The IEA is an offshoot of the Organization of Economic Cooperation and Development--the "think tank" of the Western world--and the security and price of future oil supplies will figure in estimates of future economic growth being discussed at a parallel OECD meeting.

The United States is expected to urge its allies to be wary of over-dependence on oil supplies from the Organization of Petroleum Exporting Countries, especially from the volatile Persian Gulf, by maintaining adequate stocks and developing oil wells outside the OPEC region, diplomats said.

Since the IEA last met in July, 1985, OPEC has undergone one of the most turbulent periods in its history. Its power to dictate prices seemed to crumble after July, 1985, when extreme OPEC overproduction caused prices to crash from $30 a barrel to under $9 in July, 1986.

That has changed. After several fractious meetings last year, OPEC decided to rein in its production from highs of more than 20 million barrels per day to some 16 million barrels per day today.

In December last year, it returned to take-it-or-leave-it fixed prices of around $18 a barrel, and by maintaining output within its agreed ceiling, it has succeeded in stabilizing all world oil prices around this level.

Before that, oil prices were decided by the free market, but now OPEC, showing a new political will and discipline, is again making the running.

This worries Washington and some of its allies. Nearly two thirds of the world's known crude reserves are in the Persian Gulf, and these could be tapped with prices as low as $5 a barrel in some OPEC states, and still show a profit.

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