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CONFIDENTIAL
THE LORD PRIVY SEAL'S WORKING LUNCH WITH MR SONODA, 22 MAY
SUPPLEMENTARY ESSENTIAL FACTS
Energy
1.
·
The outlook for next winter is at present bleak. Consumers
got through last winter by drawing heavily on stocks and because
other producers, notably Saudi Arabia, were prepared to increase
supply.
Stocks are now at a very low level and are not
There is a real
being rebuilt sufficiently for next winter.
danger of serious shortages by the end of this year, with
consequences for economic growth, employment and world trade.
Iranian production is still well below pre-crisis levels, and
the Saudis have announced a cutback in their production.
Consumers are facing a supply shortfall of about 2mbd.
Since January, contract
-
some
2. Prices have inevitably risen.
prices have increased by 30%, and prices in the admittedly small
spot market have been as high as 30 dollars per barrel
10-15 dol-tars above-official OPEC selling prices.
reports that Iran may cut down on the volumes of crude that it has
already contracted to sell.
companies may be affected.
We have had
British, French and Japanese oil
Iran's motives are not clear; but
she may be intending to take a quick profit by selling more oil
on the spot market.
The IEA,
3.
Mr Sonoda's visit to London follows a visit to Paris where
her attended the opening of the third International Energy Agency
Ministerial meeting on 21/22 May, chaired by Mr Howell.
founded in 1974 following the first oil crisis, brings together
the 20 leading consuming countries (except France).
Japan, as
a country totally dependent on imported oil, has played a leading
role in the IEA.
CONFIDENTIAL
14.