High oil prices seen sustained by producer/consumer nations tension - Brattle Source: AFX Publication date: 2000-11-29

WASHINGTON (AFX) - High oil prices are likely to be sustained, partly due to the "undeclared war worsening between producing and consuming nations," said Philip Verleger, a consultant at the Brattle Group, an energy consulting firm.

Speaking at a meeting of the Institute for International Economics, Verleger said that the energy market is facing a "sclerosis", due to these heightened tensions, a lack of investment in refining capacity and the impact of harsher environmental legislation in the U.S. and Europe.

"An undeclared war is worsening between producing and consuming nations and this is reducing the potential for cooperation," said Verleger.

World oil prices have climbed to ten-year highs in recent months on the back of increasing demand and low stocks, particularly in the industrialised nations. Concerns that oil prices could reach 40.00-45.00 usd a barrel have been heightened recently due to the growing unrest between Israel and the Palestinians and on unease that Iraq is poised to halt its oil exports.

Verleger said that oil producing nations in the Middle East are resisting requests from the U.S. and Europe to increase production because "no real help was offered by industrialised countries to the oil exporting nations when oil prices collapsed in 1998."

"Why should we help now," is the attitude of the producing nations, said Verleger, adding that those nations do not see oil prices at 30.00 usd a barrel as a problem.

"Oil exporting countries want prices to stay where they are or go up," he said.

Verleger was a former director of energy policy under the Carter administration.

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-- Martin Thompson (mthom1927@aol.com), November 29, 2000