France urges G-7 action on oil production, refining capacities
Business Centre - canada.com network
Laurence Frost
Canadian Press
Monday, September 19, 2005
PARIS (AP) - France will urge other wealthy countries this week to raise the pressure on oil companies and exporting countries to invest in new capacity, Finance Minister Thierry Breton said Monday.
Breton, who last week used the threat of a windfall tax to wring price and investment pledges from France's Total SA, said he would recommend the get-tough approach to fellow ministers from the Group of Seven industrialized countries including Canada, meeting Friday in Washington.
France and Britain will also jointly propose that a G-7 delegation tour oil-exporting states to press for "more visibility" on oil production capacities, Breton said.
Oil prices soared to close above $67 US a barrel Monday on worries about another storm heading for the U.S. Gulf of Mexico coast - where many refineries are still out of action or operating below capacity, three weeks after hurricane Katrina hit. Tropical storm Rita, gaining strength in the Bahamas, was expected to develop into another full-blown hurricane with the potential to inflict more damage on refineries.
Breton said he expected other European states to follow France's example by demanding that oil companies invest more of their bumper profits in new refining capacity and alternative energy for a "post-oil era" - also calling on the United States to follow suit.
Oil companies have a duty to take account of the consequences of market volatility for the wider economy, not just their own shareholders, Breton added.
"If a 21st-century industry leader does not understand that he also has to consider stakeholders, then he is not living in the real world," the minister said. "That also means taking into account the social, political and economic environment."
Breton said France will urge other G-7 members to take action to ensure that "all those who contribute to varying degrees to the volatility of the markets, deliberately or otherwise, take their responsibilities so that this volatility is reduced."
Responding to the government's tax ultimatum, Paris-based Total - which controls about one-fifth of France's gas station market - agreed Friday to pass on wholesale price declines to consumers within three days but to wait three weeks before passing on increases.
The world's fourth-largest oil company by sales announced plans to spend $971 million US by 2010 on a new French "upgrader" facility to convert heavy fuel oil into motor fuel. It plans to spend an additional $612 million on developing renewable energies including wind, solar power and biofuel - cleaner alternatives to gasoline and diesel produced from organic matter. The government last week stepped up targets for the introduction of biofuels and called on oil companies to help France meet them.
Ministers from the Organization of Petroleum Exporting Countries, meeting in Vienna Monday, edged toward consensus on plans to increase oil production quotas by a total of two million barrels per day in a bid to reassure markets that crude supply is still plentiful.
But analysts say Saudi Arabia - which said it could produce an additional 1.5 million barrels per day immediately - is the only OPEC country with significant spare capacity.
Beyond increases to production quotas, Breton said Monday that markets needed more information about production capacities in order to avoid speculative price spikes that hurt the global economy.
A joint proposal Breton plans to make with his British counterpart, Gordon Brown, will call for a G-7 delegation to visit oil-exporting countries with the aim of improving the visibility of crude supplies, Breton said. "Today there is not enough visibility between the growing demand and a supply that is difficult to evaluate."
His comments echoed remarks by Claude Mandil, head of the 26-country International Energy Agency, who said on Thursday that an OPEC production increase would be welcome, but a longer-term commitment to capacity building would be better.
Mandil called on OPEC countries to build up production capacities in the longer term and to "give a clear information and a timetable on their increased capacities in coming months."
Laurence Frost
Canadian Press
Monday, September 19, 2005
PARIS (AP) - France will urge other wealthy countries this week to raise the pressure on oil companies and exporting countries to invest in new capacity, Finance Minister Thierry Breton said Monday.
Breton, who last week used the threat of a windfall tax to wring price and investment pledges from France's Total SA, said he would recommend the get-tough approach to fellow ministers from the Group of Seven industrialized countries including Canada, meeting Friday in Washington.
France and Britain will also jointly propose that a G-7 delegation tour oil-exporting states to press for "more visibility" on oil production capacities, Breton said.
Oil prices soared to close above $67 US a barrel Monday on worries about another storm heading for the U.S. Gulf of Mexico coast - where many refineries are still out of action or operating below capacity, three weeks after hurricane Katrina hit. Tropical storm Rita, gaining strength in the Bahamas, was expected to develop into another full-blown hurricane with the potential to inflict more damage on refineries.
Breton said he expected other European states to follow France's example by demanding that oil companies invest more of their bumper profits in new refining capacity and alternative energy for a "post-oil era" - also calling on the United States to follow suit.
Oil companies have a duty to take account of the consequences of market volatility for the wider economy, not just their own shareholders, Breton added.
"If a 21st-century industry leader does not understand that he also has to consider stakeholders, then he is not living in the real world," the minister said. "That also means taking into account the social, political and economic environment."
Breton said France will urge other G-7 members to take action to ensure that "all those who contribute to varying degrees to the volatility of the markets, deliberately or otherwise, take their responsibilities so that this volatility is reduced."
Responding to the government's tax ultimatum, Paris-based Total - which controls about one-fifth of France's gas station market - agreed Friday to pass on wholesale price declines to consumers within three days but to wait three weeks before passing on increases.
The world's fourth-largest oil company by sales announced plans to spend $971 million US by 2010 on a new French "upgrader" facility to convert heavy fuel oil into motor fuel. It plans to spend an additional $612 million on developing renewable energies including wind, solar power and biofuel - cleaner alternatives to gasoline and diesel produced from organic matter. The government last week stepped up targets for the introduction of biofuels and called on oil companies to help France meet them.
Ministers from the Organization of Petroleum Exporting Countries, meeting in Vienna Monday, edged toward consensus on plans to increase oil production quotas by a total of two million barrels per day in a bid to reassure markets that crude supply is still plentiful.
But analysts say Saudi Arabia - which said it could produce an additional 1.5 million barrels per day immediately - is the only OPEC country with significant spare capacity.
Beyond increases to production quotas, Breton said Monday that markets needed more information about production capacities in order to avoid speculative price spikes that hurt the global economy.
A joint proposal Breton plans to make with his British counterpart, Gordon Brown, will call for a G-7 delegation to visit oil-exporting countries with the aim of improving the visibility of crude supplies, Breton said. "Today there is not enough visibility between the growing demand and a supply that is difficult to evaluate."
His comments echoed remarks by Claude Mandil, head of the 26-country International Energy Agency, who said on Thursday that an OPEC production increase would be welcome, but a longer-term commitment to capacity building would be better.
Mandil called on OPEC countries to build up production capacities in the longer term and to "give a clear information and a timetable on their increased capacities in coming months."
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