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SYRIA - The Oil Market Perspective.

OPEC on Feb. 28 hit back at President George W. Bush, criticising the US and other consuming countries for pursuing energy policies which threatened supply security and the global economy. In his State of the Union speech on Jan. 31, President Bush spoke of the American "addition to oil" and said the US would reduce its imports of foreign oil by 75% by 2025.

Moving away from oil made it more difficult for producing countries to invest the billions of dollars needed to ensure enough oil output to meet future demand, OPEC which control 40% of world oil argued in the commentary of its monthly bulletin.

OPEC's comments came in direct response to Bush's repeated calls for the US to reduce by 75% its "addiction" to oil from the Middle East by 2025. European countries have also looked to encourage alternatives to conventional oil, but have been less hostile to OPEC and the Middle East, arguing it was unrealistic to believe consumers would reduce their dependence on the region which controlled the vast majority of the world's conventional oil reserves.

OPEC said: "Alas, uncertainties are compounded by consumer government policies aimed at moving away from [conventional] oil - moreover, oil from specific global regions - principally, as expressed by such consumers, for security of supply reasons". It argued the only way to ensure security of supply was by ensuring security of demand, saying: "If some players choose to break the circle, then this could ultimately affect security of both demand and supply and perpetuate volatility, to the detriment of the market as a whole, as well as other sectors of the global economy".

On Feb. 27 Bush stepped up his side of the argument, saying: "I spend a lot of time worrying about disruption of energy because of politics or civil strife in other countries - because tyrants control the spigots. And it is in our national interest that we become less dependent on [conventional] oil". Many OPEC members have suffered from insecurity and have recently seen their oil industries become targets of rebels and terrorists.

Saudi Arabia, one of the most reliable suppliers to the US, on Feb 24 stopped a terrorist attack on Abqaiq, its biggest oil processing facility through which two thirds of the kingdom's 9.5m b/d output pass before exports or local consumption. The huge Saudi security operations al-Qaeda suicide bombers and none of the kingdom's oil exports was affected. Iraq managed to export 1.42m b/d in February and less than 1m b/d in January, the lowest level since shortly after the US invasion of the country, as insurgents target its pipelines. Other OPEC members have strained relations with the West and Washington in particular. Iran is at odds over its nuclear ambitions, while Hugo Chavez, Venezuela's populist president, has threatened to shut off crude oil exports to the US.
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Publication:APS Review Oil Market Trends
Date:Mar 6, 2006
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