EU-OPEC meeting focuses on alternative fuels, oil market

Jun 21, 2007, 12:29 GMT

Vienna - EU officials reassured members of the Organization of Petroleum Exporting Countries (OPEC) at a meeting in Vienna on Thursday that the promotion of alternative energy sources was not a move against OPEC.

The overarching issue at the 4th EU-OPEC Energy dialogue, established in 2004, were current oil prices and bottlenecks in refining capacities. Both OPEC Secretary General Abdalla Selem El-Badri and EU Energy Commissioner Andris Piebalgs rejected calls for increasing supply.

An output increase would go into stockpiles and not bring down prices, El-Badri said, as there was a tightness in refining capacities - an area where OPEC had no influence.

'More oil will not mitigate the gasoline prices,' he said at a press conference after the meeting. The EU would take action on the issue when a study to be released in September had provided sufficient data, Piebalgs said.

The current volatility of markets was a cause of concern for both parties. 'Volatility is our worst enemy,' El-Badri said, adding that solutions had to be found to for this 'irritating' factor.

The EU was content with OPEC reassurances that factors such as a strike in Nigeria would not lead to disruptions of supply.

German Economics Minister Michael Glos, serving as president of the EU Energy Council at the high-level meeting, said that burning of fossil fuels must be restricted for climate reasons.

He reassured OPEC biofuels would be 'introduced as a supplement' to fossil fuels.

'We do not want to restrict OPEC,' he told journalists at the outset of the meeting. Any EU subsidies for producing biofuels would not create 'any disruption in the oil market', Piebalgs added.

OPEC had warned earlier that in case of a long-term boom in biofuels it could cut down on investment in oil production, and that in turn a fuel shortage could be the result if biofuels ran into supply problems.

EU experts said ahead of the meeting that even if biofuels were increasingly used in Europe in the next years, the demand for oil would remain stable.

Around 40 per cent of the EU's oil imports come from OPEC countries. After a period of sustained increase, prices for OPEC crudes fell slightly on Thursday to 67.78 dollars per barrel, down 45 cents from Wednesday levels.

Prices have been hovering below the 70-dollar barrier for a while. Analysts believe that if this barrier is breached prices can climb a lot higher, into the mid-80s range.

Glos warned that current prices were 'the upper level of what will be tolerable for consumer countries,' adding the OPEC had a shared interest in avoiding a global economic slowdown.