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THE NEW YORK TIMES: Blame Game Begins as Oil Producers, Consumers Gather

Blame Game Begins as Oil Producers, Consumers Gather

By REUTERS
Published: April 21, 2006

Filed at 12:45 p.m. ET

DOHA (Reuters) – The world's energy consumers and producers traded blame over record high oil prices they agree are a danger to all on Friday as they arrived here for three days of talks aimed at bringing the two sides closer together.

Oil raced to an all-time high above $74 a barrel this week as Iran defied world pressure to halt its nuclear programme, a quarter of Nigeria's output lay idle after rebel attacks and Iraq's once significant oil industry was mired in crisis.

There is rare consensus that today's prices are too high. Consumers are afraid their economies will suffer while producers fear a price collapse that will damage their oil industries.

But there are divisions over how to pull prices away from their inflation-adjusted high of above $80, touched in 1980, the year after the Iranian revolution. Consumers want more oil. Producers want to be sure investing in new fields will pay off.

“One side is saying 'guarantee supply' and the other is saying 'guarantee demand','' Algerian Energy and Mining Minister Chakib Khelil told Reuters in an interview ahead of the talks.

“Each one is asking the other to do something he can't unless the other makes the first step. It's a vicious circle.''

Ministers from 65 countries, including top consumer the United States and members of the Organization of the Petroleum Exporting Countries, will attend the Doha meeting of the International Energy Forum, which runs from April 22 to 24.

Senior executives from 32 oil companies including Chevron (CVX.N), Exxon Mobil (XOM.N), BP (BP.L), Royal Dutch Shell (RDSa.L) and Saudi state firm Saudi Aramco will also be there.

Britain's finance minister Gordon Brown, speaking in Washington, voiced the thoughts of many consuming nations with a call to OPEC to increase its oil output to rein in prices.

OPEC ministers will hold informal discussions here on April 24 but, with the group already pumping close to the limits of its capacity, it seems powerless to bring down prices.

“The genie is out of the bottle and OPEC cannot put it back into the bottle because OPEC did not take it out,'' Libya's top oil official Shokri Ghanem told reporters.

He said fears of U.S. military action against Iran, the world's fourth biggest crude oil exporter, had added up to $15 to the cost of a barrel of oil.

UNSTOPPABLE RISE

The first gathering of the IEF was held in Paris in response to the 1990-1991 Gulf war, when oil spiked briefly to $40 before sinking back below $20.

The last time the forum met, in Amsterdam in May 2004, importers were complaining that oil cost $40 a barrel and many believed $50 would see world economic growth grind to a halt.

Few expect the latest talks to end a four-year rally, ignited by strong demand from the United States and Asia and underinvestment in energy infrastructure over the past decade.

A global shortage of refinery capacity for transport fuels that must meet tighter environmental regulations and lower supply from Nigeria, Iraq and Venezuela has added impetus.

“The problem is a lack of policy and planning in consuming countries. They have always been concentrating on the financial earnings of oil,'' one OPEC delegate said.

United Arab Emirates' Oil Minister Mohammed bin Dhaen al-Hamli said consumers and producers bore a shared responsibility to invest in new production and refineries.

The International Monetary Fund called on Wednesday for the United States, consumer of more than 40 percent of the world's gasoline and a quarter of its oil, to consider raising fuel tax.

But that idea has few fans in Washington.

The IMF's call on oil producing nations like Saudi Arabia and Russia to eliminate obstacles to investment is also unlikely to get a positive response any time soon.

“There is no existing international mechanism, other than the world oil market, to address the instability of oil prices,'' academic John Mitchell said in a recent paper.

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