OPEC Worries About Phase-out of Fossil Fuels

by Luis Cordova and Andres Canizalez

The declaration, which emerged at the close of the second-ever Organization of Petroleum Exporting Countries (OPEC) summit in the oil cartel's 40-year history, formalizes the commitment of its 11 member nations "to seek new and effective channels of dialogue between oil producers and consumers, for the purpose of market stability, transparency and sustainable growth of the world economy."

But the delegations to the meeting, held in the midst of international pressures against high crude prices, also concentrated on issues outside the oil trade, demonstrating unease about environmental and development matters.

"The biggest environmental tragedy facing the globe is human poverty," says OPEC, calling it is a reality all industrialized nations must confront.

The final document, known as the Caracas Declaration, expresses OPEC's worries about the consequences of the Kyoto Protocol, a United Nations convention that establishes guidelines for reducing fossil fuel consumption.

"It is a problem for everyone, not just producing countries," said Pres. Hugo Chavez, the summit's host, in his comments on the Caracas Declaration.

The Protocol was designed to fight global warming resulting from the greenhouse effect, which scientists say is caused by the emission of gases from burning fossil fuels, such as coal and petroleum.

In the summit's final document, OPEC invokes "the principle of common but differentiated responsibility" -- a clear reference to the need for emphasizing environmental measures for those countries that produce the most greenhouse gases as a result of their high fossil fuel consumption.

The declaration explicitly calls for implementing policies and measures to minimize the adverse social and economic impacts of (the Protocol's) response measures on the countries whose economies are highly dependent on the production and export of fossil fuels.

The text also recommends "the use of both oil and gas in circumstances where they can be substituted for other fuels which are recognized as being damaging to the global environment," such as coal.

The Protocol's principal goal is to reduce greenhouse gas emissions, based on 1990 levels, by 5 percent between 2008 and 2012. This would imply a sharp reduction in the rising demands for petroleum forecast for the coming decade.

The restrictions on oil consumption would cause a drop in demand of 6.5 million barrels per day, and could cost the OPEC nations a combined $23 billion in export losses, according to the organization's General Secretariat.

Nigeria's President Olusegun Obasanjo said the losses could reach $60 billion by 2030 and urged OPEC to stand firm and united in the discussions of the Protocol, which are to be renewed in November at The Hague.

Obasanjo stressed that climate change affects everyone, and that there should be no doubt that the OPEC members are as concerned as the rest of the world. Other presidents at the summit also emphasized that despite their concern about the economic effects of the Kyoto Protocol, OPEC wants to cooperate in preserving the world's environment.

In informal statements, OPEC members have suggested reducing the restrictions on petroleum while increasing limitations on coal, which they consider a worse polluter. Coal mining continues to be subsidized in numerous countries.

The leaders have also stressed the importance of creating conditions so that oil-dependent economies can diversify their sources of revenue.

Concerning development, OPEC said in its declaration that the eradication of poverty must be a global priority, and called on the nations of the industrialized North to take part in related efforts.

The text also notes "with concern that the debt levels of many developing countries have become unsustainable."

The oil cartel announced that it would continue its efforts to fight the social effects of poverty by maintaining the OPEC Fund for International Development, which has provided $5.6 billion in resources since its creation in 1976.

However, no mention was made of expanding OPEC aid for developing countries or for international organizations supporting poor communities, as Pres. Chavez had proposed.

Chavez, who also proposed establishing an OPEC-based bank, mentioned several times during the summit the need to combat inequalities in the world. "OPEC is an institution that fights for justice," he stated.

The cartel says prices are not determined only by supply and demand, but also result from speculation on the oil market, bottlenecks in refining and transportation, and from the high taxes governments charge consumers.

An "excellent opportunity" for this unprecedented dialogue, according to OPEC leaders, will be the 7th International Energy Forum to be held in mid-November in Riyadh.

Chavez said in the summit's closing speech that petroleum exporters are open "to dialogue at all possible levels, whether technical, ministerial or among heads of state."

The 11 OPEC members -- Saudi Arabia, Algeria, United Arab Emirates, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar and Venezuela -- are enjoying renewed influence over the oil market since the quotas and cutbacks it adopted in March 1999 successfully drove up bottomed-out prices.

Crude prices are currently at about $30 a barrel, following the OPEC decision to put an additional 800,000 barrels on the world market daily and the United States' announcement that it would release 30 million barrels from its strategic reserves.

Iran's President Mohammad Khatami summed up the Caracas meeting, stressing that it is through dialogue that producers and consumers can confront issues related to market access and ensure the uninterrupted flow of oil, acceptable petroleum prices and the prevention of discriminatory and protectionist policies.