Venezuela and Others Resist Pressures to Increase Production at OPEC

Venezuela and five other oil-exporting nations made history this week after they broke consensus and their insistence on maintaining oil production at current levels prevented the twelve-nation Organization of Petroleum Exporting Countries (OPEC) from increasing oil production quotas for the coming period. 

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Venezuela and five other oil-exporting nations made history this week after they broke consensus and their insistence on maintaining oil production at current levels prevented the twelve-nation Organization of Petroleum Exporting Countries (OPEC) from increasing oil production quotas for the coming period. While three member states insisted on a Saudi proposal to increase daily oil output by 1.5 million barrels, Venezuela and others maintained their position, leaving existing production quotas in place.

A first in OPEC’s 51-year history, the organization’s 159th ministerial meeting saw Venezuela, Algeria, Angola, Ecuador, Iran and Libya oppose an increase in oil production while Saudi Arabia, Kuwait, Qatar, United Arab Emirates insisted on an increase. Iraq and Nigeria’s stance remained unclear.   

“International agencies are looking for fissures in OPEC,” affirmed Venezuela’s energy and petroleum minister and president of the country’s state-owned Petroleos de Venezuela (PDVSA), Rafael Ramirez.

“There was a proposal to raise output by between 1.5 million barrels a day and 2 million…We, given the uncertainty in the market, thought that could cause the price of oil to collapse…the conditions to make that decision aren’t there,” said Ramirez.

According to the Venezuelan oil minister, “OPEC remains united and has emerged strengthened from the meeting.”

Normal worldwide oil production has been interrupted by the fighting in, and aerial bombardment of, Libya (down 1.3 million barrels per day) as well as the ongoing unrest in both Yemen and Syria (down 300,000 barrels between the two non-OPEC states).

According to OPEC Secretary General Abdala El-Badri, without an increase in oil production the nations that import oil will find themselves short a total 2 million barrels per day in the third semester of 2011, and 1.5 million barrels per day in the fourth.

With no agreement reached, the existing production quotas (established by OPEC in December 2008) officially remain in place. However, Saudi press reported today that Saudi Arabia’s oil production would increase by 700,000 barrels per day in July with or without OPEC approval. 

Ali al-Naimi, Saudi Arabia’s Minister of Petroleum, said that his country plans to make up for the “margin of disagreement within OPEC”, suggesting the lack of consensus allows each member nation to decide how much, or little, to produce in the coming period. 

On Tuesday Venezuelan President Hugo Chavez told reporters at a Salinas, Ecuador press conference that “the international crude oil market is sufficiently supplied.”

“There is no crisis,” he said. “The cause of fair prices is not the lack of oil supply, but rather several structural factors.”

According to Chavez, “today’s prices, about $100 per barrel, are fair, from our point of view.” He also affirmed that “the madness of bombing Libya, or the aggressions against Iran, another OPEC country,” is the cause for current oil prices.

On OPEC

According to the organization’s website, OPEC was founded in Baghdad, Iraq, on September 14, 1960. Its five founding members are Venezuela, Saudi Arabia, Iraq, Kuwait, and the Islamic Republic of Iran. They were later joined by Qatar (1961), Indonesia (1962), Socialist People’s Libyan Arab Jamahiriya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007).

In 1995, Gabon ended its membership and in 2009, Indonesia suspended its role in the organization, leaving a total of twelve Member Countries.

Venezuela is said to have played a pivotal role in OPEC’s initial oil production policies as Venezuela’s Juan Pablo Perez, along with Saudi Arabia’s Abdullah Al-Tariki, helped draft OPEC’s Founding Resolution [14 September 1960]. As part of their strategy to give OPEC the strength it needed to face the “Seven Sisters” – the seven largest private oil companies in the world back in 1960 – both Perez and Al-Tariki insisted on OPEC’s right to regulate oil production so as to secure a price that best suited the needs of oil-producing countries.

In 2008, US presidential hopeful Hillary Clinton (the current US Secretary of State) vowed to end OPEC’s role in managing oil production quotas by suing the organization at the World Trade Organization (WTO), affirming that OPEC could “no longer be a cartel, a monopoly that get together once every couple of months in some conference room in some plush place in the world to decide how much oil they’re going to produce and what price they’re going to put it at.”

According to Bernard Mommer, Venezuela’s former governor designate at OPEC, “every country in the world has the sovereign right to manage their own natural resources which, as such, are part of their national territory. In the case of non-renewable resources [like oil], this right has special characteristics.”