LONDON (Reuters) – OPEC needs a higher oil price of $100 a barrel because the rising costs of imports such as food have eroded OPEC members’ income, Libya’s top oil official told Reuters on Wednesday.
Oil has traded largely between $70 and $80 a barrel all year, a range many in the Organization of the Petroleum Exporting Countries have said is high enough to give producers a decent income without hurting the world economy.
Still, members of OPEC, a group of 12 countries that rely on oil for most of their income, have been hurt by rising food costs, Shokri Ghanem, the chairman of Libya’s National Oil Corp, said by telephone from Tripoli.
“It should be around $100 to compensate for the big increase in the food price,” Ghanem said. “Prices of food have risen and it is tantamount to having a big cut in your income.”
“OPEC countries who are importing their food from outside are facing a big increase in the import bill.”
“We think $100 is the price OPEC should seek.”
Wheat prices have risen by more than 50 percent since the end of May after Russia suffered its worst drought in 130 years and are at their highest since 2008.
Traders say Libya has been a major purchaser of Russian and Ukrainian grain and that could be in the market for alternative supplies following a Russian export ban and slowdown in exports from Ukraine.
Ghanem did not specify how, and when, OPEC should seek a price of $100. The organization, which pumps more than a third of the world’s oil, will mark the 50th anniversary of its formation next week.
In the past, OPEC officials have blamed a weaker U.S. dollar for reducing the purchasing power of oil income.
Two ways in which OPEC could boost prices would be to lower its oil output target — something it has not done since December 2008 — or to reduce supplies informally to bring production closer to the target.
The group meets in October to review output policy.
In December 2008, it announced a record cut in its oil supplies of 4.2 million barrels per day to bolster prices in the aftermath of the economic crisis.
Since then OPEC has left the target unchanged but many members of the group have increased actual supply and it is meeting just over half of the output reduction, according to a Reuters survey.
So far, no-one from OPEC has suggested publicly that the group should reduce supply at October’s meeting. Iraq said on Tuesday there was no reason for OPEC to reconsider production levels.