Published: September 10 2000 20:34GMT | Last Updated: September 10 2000 20:57GMT There are two conclusions to be drawn from Opec's decision to raise its output ceiling by 800,000 barrels a day. Only one of them is reassuring for the west. The good news is that Opec is really trying to avoid a damaging run-up in oil prices this winter. The speed with which oil ministers reached their decision, the apparent lack of dissent, the fact that the figure is the highest credible level of extra output that Opec is capable of pumping - all this emphasises that the organisation has no desire to push prices up to unsustainable levels. The bad news is that between them, Opec and the oil companies have managed to create an unstable oil industry, in which slight misjudgments of the demand for output are capable of causing worrying bursts of price acceleration and outbursts of public anger. Pumping an extra 300,000 barrels a day - the likely amount of "new oil" that Opec will now produce, given previous concealed over-production - will do no more than dampen the hysteria. Modest action earlier in the year to increase the ceiling and to get spare capacity in Saudi Arabia ready for use would most likely have prevented it entirely. But the misjudgment is by no means only on Opec's side. The industry has been so focused on cost-cutting and consolidation in recent years that it has left itself with inflexible refineries and a permanent vulnerability to shortages of specific oil products. Meanwhile, western governments have failed to persuade the public of the environmental case for high levels of energy taxation. Probably such high-minded arguments would always cut little ice with the energy-dependent small business people - farmers, road hauliers, fishermen - for whom rising oil prices are a desperate blow. But by making the case to a wider public, governments would be in a stronger position to override illegal blockades. One risk now is that what would have been a manageable mismatch between demand and supply of crude this autumn turns into a serious crisis if blockades spread and individual motorists rush to fill their cars as a precautionary measure. Such a move would rapidly exhaust the stocks in the distribution system, causing panic pricing and localised fuel shortages. Governments must prevent this scenario unfolding by ending blockades and undermining public sympathy for the protestors. A second risk, though, is to the long-standing western policy of ensuring that the economic rent arising from oil shortages accrues to developed-country treasuries rather than Opec. The policy has been a great success; governments must not allow public discontent with this autumn's price rises to undermine it. _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist
