Venezuelan unrest causes oil prices to rise

This is a transcript of AM broadcast at 08:00 AEST on local radio. AM - Monday, December  30, 2002 8:28

ELEANOR HALL: Thirty years after the first oil price shock, the world has been hit by a new energy crisis. While it's not of the same magnitude as the 1970s OPEC crisis, the ongoing strike in oil-rich Venezuela has caused oil prices to soar to nearly US$33 a barrel. And at the pump here in Australia, prices are hitting a dollar a litre in the capital cities, with no relief in sight, as our Finance Correspondent Stephen Long reports.

STEPHEN LONG: It's the like selling coals to Newcastle, sand to the Sahara. Venezuela, the world's third biggest crude oil exporter, has begun importing oil. The first tanker from Brazil has already arrived. It may provide some relief for Venezuelans queuing overnight for the scant supplies of petrol still left but it won't end a global supply crisis which has prices at the pump in Australian capitals nudging a dollar a litre, higher in the regions. The general strike which has cut supplies from Venezuela to the world is about to enter its fifth week and the intensity of protests aimed at toppling President Hugo Chavez show no signs of abating. Even his regime concedes it will be weeks at best before the oil supply crisis ends. Venezuela's Vice-President Bernardo Alvarez.

BERNARDO ALVAREZ: We think by the middle of January, we will normalize the operations in Venezuela.

STEPHEN LONG: Snow storms in North America haven't helped the oil crisis, with heating fuel demands surging in the bitter northern winter. West Texas crude hit US$32.72 a barrel in recent trade, it's highest price for more than year, and some analysts are predicting it could reach US$35 a barrel if the Venezuelan blockade continues. John Hirjee of Deutsche Bank.

JOHN HIRJEE: If we look at the last spike, crude prices approached nearly 35 dollars a barrel. Now if this prolonged, if this strike in Venezuela is prolonged then we could conceivably see prices reach that level again, and in conjunction with that, the cold weather in the US, so all in all I don't think that oil prices in the short-term are heading downwards.

STEPHEN LONG: It's unlikely the world will see a repeat of the 1970s oil price shock, which caused soaring inflation and a global recession but a prolonged period of high prices could nonetheless fuel inflation and dampen economic growth worldwide.

ELEANOR HALL: That report from our Finance Correspondent, Stephen Long.