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Venezuelan Oil Strike May Soon Affect Prices

Aired December 12, 2002 - 14:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KYRA PHILLIPS, CNN ANCHOR: Now, we want to dig a little deeper, as it is, into (ph) OPEC's plans to bring its member states back into line, and that brings us to CNN Senior Correspondent Brooks Jackson in Washington -- Brooks, a little one on one -- 101 for us.
BROOKS JACKSON, CNN SENIOR CORRESPONDENT: Exactly, Kyra. Well, in the wacky world of OPEC, less actually means more. By raising production quotas about 6 percent, the OPEC ministers hope to cut production by even more than that. Seem crazy? It's all about cheating.

The OPEC nations habitually cheat on each other by exceeding the production quotas that they agree to. Take a look. The OPEC countries are actually producing well over 24 million barrels a day currently, but they're only supposed to be producing fewer than 22 million barrels a day under the quotas they'd set for themselves before today's increase.

The excess is running about 2.7 million barrels a day, actually, so actual production is still nearly a million and a half barrels a day over the new quotas. Now, the idea is that slightly higher quotas will be more realistic, and that the OPEC nations will start toeing the line and will cut back actual production.

Now, will that happen? Prices are rising today, so the markets are betting they will, at least for a little while. Now, that's not the only factor that could be pushing up oil prices soon. Indeed, we could be looking at a triple whammy in the oil markets.

The most immediate concern is Venezuela. It stopped shipping any oil because of labor unrest, and it may surprise viewers to hear it, but the U.S. gets more oil from Venezuela than from Iraq, a lot more.

Looking at all petroleum products, including things like gasoline as well as crude oil, Canada is actually our number one supplier, sending 1.9 million barrels per day this year, followed by Saudi Arabia, Mexico and our fourth biggest supplier, Venezuela, at 1.4 million barrels.

Iraq was only our sixth largest producer last year at 795,000 barrels a day, and their shipments are down to practically nothing now, after Saddam said last April he was cutting off oil exports to protest U.S. support of Israel.

The U.S. economy hardly noticed the loss of Iraqi oil, but Venezuela could be another matter. Look at it another way. Of every 14 gallons of gasoline, heating oil, diesel, and jet fuel consumed in the U.S., Venezuela alone supplies one.

That is more than 7 percent of total U.S. consumption. Now, you'd think that with that supply now cut off, markets would send U.S. prices soaring, but it hasn't happened yet. Look at the fuel prices at the pump. Regular gasoline, down for the fourth week in a row to $1.36 last week. And diesel also down to a buck 41.

It is as though nothing was happening. Maybe that's because it takes about a week for Venezuelan oil to get here. It comes by slow boat, literally, so there's still oil coming in, but not for much longer. And the news may not have sunk in with commodity traders. It will take government bean counters another week after the Venezuelan oil dries up to note that fact in official statistics, so watch out. Playing the what-if game, the U.S. could face a quadruple whammy if OPEC stops cheating and Venezuela doesn't get its act together and a war disrupts Middle Eastern oil and we get a very cold winter. It could happen. But for now, the markets are betting it won't. Crude oil prices are up just a little -- Kyra.

PHILLIPS: Well, we are following all those stories. Brooks Jackson, thank you so much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Aired December 12, 2002 - 14:31   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Now, we want to dig a little deeper, as it is, into (ph) OPEC's plans to bring its member states back into line, and that brings us to CNN Senior Correspondent Brooks Jackson in Washington -- Brooks, a little one on one -- 101 for us.
BROOKS JACKSON, CNN SENIOR CORRESPONDENT: Exactly, Kyra. Well, in the wacky world of OPEC, less actually means more. By raising production quotas about 6 percent, the OPEC ministers hope to cut production by even more than that. Seem crazy? It's all about cheating.

The OPEC nations habitually cheat on each other by exceeding the production quotas that they agree to. Take a look. The OPEC countries are actually producing well over 24 million barrels a day currently, but they're only supposed to be producing fewer than 22 million barrels a day under the quotas they'd set for themselves before today's increase.

The excess is running about 2.7 million barrels a day, actually, so actual production is still nearly a million and a half barrels a day over the new quotas. Now, the idea is that slightly higher quotas will be more realistic, and that the OPEC nations will start toeing the line and will cut back actual production.

Now, will that happen? Prices are rising today, so the markets are betting they will, at least for a little while. Now, that's not the only factor that could be pushing up oil prices soon. Indeed, we could be looking at a triple whammy in the oil markets.

The most immediate concern is Venezuela. It stopped shipping any oil because of labor unrest, and it may surprise viewers to hear it, but the U.S. gets more oil from Venezuela than from Iraq, a lot more.

Looking at all petroleum products, including things like gasoline as well as crude oil, Canada is actually our number one supplier, sending 1.9 million barrels per day this year, followed by Saudi Arabia, Mexico and our fourth biggest supplier, Venezuela, at 1.4 million barrels.

Iraq was only our sixth largest producer last year at 795,000 barrels a day, and their shipments are down to practically nothing now, after Saddam said last April he was cutting off oil exports to protest U.S. support of Israel.

The U.S. economy hardly noticed the loss of Iraqi oil, but Venezuela could be another matter. Look at it another way. Of every 14 gallons of gasoline, heating oil, diesel, and jet fuel consumed in the U.S., Venezuela alone supplies one.

That is more than 7 percent of total U.S. consumption. Now, you'd think that with that supply now cut off, markets would send U.S. prices soaring, but it hasn't happened yet. Look at the fuel prices at the pump. Regular gasoline, down for the fourth week in a row to $1.36 last week. And diesel also down to a buck 41.

It is as though nothing was happening. Maybe that's because it takes about a week for Venezuelan oil to get here. It comes by slow boat, literally, so there's still oil coming in, but not for much longer. And the news may not have sunk in with commodity traders. It will take government bean counters another week after the Venezuelan oil dries up to note that fact in official statistics, so watch out. Playing the what-if game, the U.S. could face a quadruple whammy if OPEC stops cheating and Venezuela doesn't get its act together and a war disrupts Middle Eastern oil and we get a very cold winter. It could happen. But for now, the markets are betting it won't. Crude oil prices are up just a little -- Kyra.

PHILLIPS: Well, we are following all those stories. Brooks Jackson, thank you so much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com