Mexico Energy Secretary Luis Téllez said he is confident that an anti-dumping petition targeting his country, Venezuela, Saudi Arabia, and Iraq by a group of independent U.S. producers would be rejected by the U.S. International Trade Commission, but he also painted a bleak scenario should the petition be successful (see related articles on this page and p. 32).
"We have put together a group of lawyers and experts with Venezuela and Saudi Arabia-we have had no contact with Iraq-and we are confident that we have all the elements necessary to prove that we are not selling below the normal price," Téllez said at a July 13 press conference in Mexico City.
Dumping claims rebuffed
Tellez said it is absurd for anyone to suggest that Mexico and Venezuela, in particular, would sell their oil below the market price, because the two countries depend so heavily on petroleum income to finance their government budgets.
The demand of the U.S. producers` group focuses on price differentials between sales in Spain and in the U.S. Téllez insists that Mexico is a "price taker" in both countries, rather than a price fixer. "We set our crude prices based on a formula using benchmark crude prices, like Brent or West Texas intermediate, and then add on transport costs and adjust for oil quality," Téllez said. "It`s a totally transparent formula."
Télez also called the accusation that the four countries are providing subsidies for oil "ridiculous." He added that he had no idea how the U.S. producers had come up with their subsidy figure of $6.28/bbl nor why Mexico would receive a much lower punitive tariff than the other countries if the petition is successful.
Grim scenario
Were the petition to succeed, Tellez said, not only would major trade disputes ensue between the U.S. and three important allies, but also the entire international oil market would be disrupted. Saudi Arabia would look to sell more crude in Europe, which would in turn displace Norwegian and British crude to the U.S., he said, while Mexico and Venezuela would face extreme difficulties in finding alternative markets for their heavy crudes.
"But I don`t think we`re going to get to that point," Téllez said. "We have all the economic, technical, and legal elements needed to finish this successfully. We are having to pay a lot of money for lawyers, but that`s very little compared with the potential dislocation of the international oil market."
Referring to Mexico`s recent decision not to eliminate a 4% tariff on natural gas, as had been previously announced, T?éllez said it was a pressure tactic specifically linked to the dumping demand. "There are many gas producers in the U.S. that are also independent oil producers, who probably are interested in the Mexican market," T?llez said. He added that the tariff would immediately be dropped to zero as originally planned if the petition were overturned.
At presstime, Téllez was planning to fly to Washington, D.C., sometime during July 15-17 to discuss the case with defense lawyers. He said he would also meet with some U.S. energy officials but noted that he is legally prohibited from discussing the dumping demand with them.
Téllez said the U.S. Department of Commerce would make a decision on the petition`s standing on Aug. 9, and if the decision is positive, the ITC would meet on Aug. 11 or 12 to begin hearing both sides of the case.
