Brussels, 28/09/2000 (Agence Europe) - The problems of oil crops up twice on the agenda of Community activities on Friday: at the session of the EcoFin Council (see above) and at a meeting of national competition authorities with Commissioner Mario Monti and the Commission's services.
The exchange of views between finance ministers should not take on a general character on the problem of oil as a whole, as other Councils are also competent (Energy Council, General Affairs Council for relations with OPEC and oil-exporter countries, Transport Council), and ,anyway, it is only for the Biarritz Summit, in two weeks time, that the Commission will have finished drafting its new comprehensive paper (see EUROPE of 27 September, p.8). The finance ministers will no doubt, implicitly or explicitly, confirm their penchant against any generalised drop in tax and could (probably within the Eurogroup) proceed with an exchange of views on the controversial issue of the possible use of a part the compulsory strategic reserves of Member States. The issue has become topical since the United States announced that it would use part of its reserves, following which stances have multiplied, all too often improvised and at times without knowing the facts of the problem. Thus, in particular:
- the European Commission called for care, by emphasising that any possible use of reserves must be the object of a prior consultation between Member States, and that it is necessary to take into account all the economic, legal and political factors. It is not even clear if the consultation must lead to a common position by the Fifteen, or if each Member Sate can, after the consultation, take autonomous national decisions;
- the acting President of OPEC, Mr Ali Rodriguez, Venezuelan Minister for Oil, stated that certain EU countries have already used some of their reserves, and that OPEC would draw conclusions over its own levels of production. The European Commission spokesperson recalled that the obligatory reserves cover the equivalent of 90 consumption, while the present average level in the EU is 111 days; every Member States must use its eventual surplus without this resulting in the strategic reserves being affected.
Scepticism from Mr Solbes, prudence from Mrs de Palacio, participation of Mr Prodi
In a press conference held on Wednesday, the Commissioner for Economic and Financial Affairs, Pedro Solbes, indicated that the Ecofin Council would probably not be able to reach any conclusions on the possible use of reserves; it will only have a preliminary exchange of views personally, Mr Solbes will only speak when it will have answered the issues concerning legal availability (notably with regard to the rules of the International Energy Agency) and the situation of these reserves in the various Member States. The spokesperson of Mr Palacio felt that the strategic reserves are aimed at emergencies; their aim is to tackle true supply problems and not fight against the high price of oil. For the EU the reasonable price should be at around USD 22 to 28 per barrel.
The exchange of views between Ministers will first take place within the Euro group, at twelve, then at lunch with Fifteen. The President of the Commission, Mr Prodi indicated that he would take part in this lunch.
Information from Caracas, where the OPEC Summit is gathered, would indicate that the oil producing countries are prepared for dialogue with the importing countries. Venezuelan sources assert that President Hugo Chavez had a telephone meeting with the French Prime Minister Lionel Jospin during which the idea of a EU/OPEC Summit favourably discussed.
Commission and national competition authorities will examine d oil companies
respect free competition
On the eve of the meeting, this Friday 29 September, between the European Commission and the national competition authorities, dedicated to the competition situation in the fuel sector, Commissioner Mario Monti announced: "We are perfectly aware of the fact that the competition rules cannot resolve on their own, nor for the most part, the problems of this sector. Though we intend to study to extent to which the laws of Community and national competition may contribute to making the fuel sector more competitive, to the benefit of European citizens.
The analysis of the situation carried out by the Commission indicate that:
1) on the make-up of fuel prices, the highest factor is that of taxation, the second factor is that of crude oil, the third is the refining, marketing and distribution costs, 2) free competition does not exist on the market for the production of crude oil. The restrictions to production decided by common agreement by the OPEC countries have similar restrictive effects to those of a cartel. However, the EU cannot apply its competition rules to these trends as they are by sovereign States and not companies; 3) certain elements cast doubt that free movement is fully respected on the refining, marketing and distribution markets for fuels.
On this last point, the Commission services write: "the practice of more or less identical prices for fuels leads to think that they are the object of coordination between major oil companies". Though it adds: "however, to demonstrate the existence of a cartel, the Commission cannot content itself with proving that there is a similar behaviour between the major oil companies, as such a similarity can be explained by other considerations of an economic nature". Given the market conditions, the companies may increase their prices to align them with those of competitors without having concluded any agreements. Also it is just as hard to prove that their pricing policy is abusive, as the increase in fuel prices seems to follow that of the increase in crude prices. Other elements, - notably a) the present price differences between taxes from one Member State to another; b) insufficient cross border trade - however lead to suspect that the free market is not working as it should.
All these elements will be discussed with the national competition authorities, of which some have already condemned the oil companies (in Italy and Sweden), other have opened investigations (in Germany, France, Spain and Denmark).