Exclusive: Venezuela wants OPEC price band restored

Wed Jun 27, 2012 11:30am EDT
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By Marianna Parraga

CARACAS (Reuters) - Venezuela on Wednesday proposed that OPEC set an oil price band of $80 to $120 a barrel, Energy Minister Rafael Ramirez told Reuters, bidding to restore a policy the cartel tried 12 years ago in a failed attempt to control prices in a tight range by adjusting supply.

The Organization of the Petroleum Exporting Countries in 2000 adopted a $22 to $28 price band, requiring its members to cut or raise output in an effort to keep prices in that range for an OPEC basket of crudes. The policy quickly proved unworkable, however, and increasing demand from China pushed prices irreversibly through $30 in 2004.

"We need to restore the band system," Ramirez told Reuters late Tuesday. "It could be between $80 and $120 right now, that would be sufficiently wide to allow flexibility."

A Middle East OPEC official immediately dismissed the idea as a non-starter.

"Having a band was never successful in the past and won't be successful now," the official said. "Its OK to have a band when the prices are going up, but what happens when the price goes down? You'll have to keep cutting production? This is out of the question."

Iran, an ally of Venezuela in OPEC, did not dismiss the idea out of hand, pointing out that the $100 middle of the band proposed by Caracas is where many producers including Saudi Arabia want prices.

"Venezuela is not the only country to believe the price should be around $100. The question is how do we protect this level. This issue should be discussed if it is proposed officially to OPEC," said Iran's OPEC governor, Mohammad Ali Khatibi.

An official at OPEC declined comment.   Continued...

Venezuela's oil minister Rafael Ramirez talks to journalists before a meeting of OPEC oil ministers at OPEC's headquarters in Vienna, June 14, 2012. REUTERS/Heinz-Peter Bader