EU Says OPEC Production Cut May Hurt World Economy

The European Commission said Thursday that OPEC's decision to cut oil production will risk price hikes, thus hitting the world economy.

"The Commission considers OPEC's decision of January 17 to reduce oil production by 1.5 million barrels a day risks pushing prices back up, which would have harmful effects on world growth and, in the long term, on the interests of OPEC members," the European Union (EU) executive branch said in a statement.

"It considers, in fact, that such a reduction is likely to be an impediment to the restoration of stocks and will thus increase price volatility," the statement said.

OPEC agreed Wednesday to cut output to 25.2 million barrels a day in an attempt to curb possible price drops. Oil markets, which had expected the move, were stable on Thursday.

The commission said consumer countries were still anxious to create a permanent forum between oil consumer and producing countries, an idea EU Energy Commissioner Loyola de Palacio had promoted at an OPEC meeting in October.

At that time oil prices were soaring well above 30 dollars a barrel, causing a storm of protest by motorists, hauliers and other fuel users that brought several European cities to a standstill.

De Palacio said OPEC's decision once again highlighted the need for the European Union to adopt an "ambitious" European energy strategy.

"We have to explore ways of making a real European strategy that is more coherent and responsible: that will mean a much more open energy supply and a policy of rationalizing energy consumption, especially in the transport and building sectors," de Palacio said.

The commission would present firmer proposals along these lines in time for a summit of EU leaders in Gothenburg, a Swedish city, on June 15-16, she said.

The policy paper would concentrate on energy saving and on supporting new vehicle technologies, and would contain specific objectives for 2010, she added.

The document would include ideas on promoting alternative fuels for automobiles, such as biofuels, natural gas and hydrogen and would aim for these to gain a 20 percent market share by 2020, said the statement.






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