LONDON (Bloomberg) -- The U.S. and other oil-consuming nations say OPEC, producer of 40 percent of the world's oil, should be doing more to expand output to help ease prices.

The producer group, meeting in Caracas two days from now, is likely to keep crude production near record levels, rejecting yesterday's call by Venezuela to cut output. Officials from the United Arab Emirates, Algeria and Iran have signaled output quotas won't be reduced. Still, five increases over two years in the production ceiling have failed to check oil's climb.

U.S. Energy Secretary Samuel Bodman said last week that oil producers need to increase production to create a bigger cushion of excess supply. OPEC members are struggling with aging fields, militants and government policies that hinder supply growth. In Kuwait, for example, expansion has been delayed by the failure to change laws that ban foreign investment.

``Each time I talk to my counterpart in Kuwait, he will say we're going to get this through parliament next month, or the month after,'' Bodman said in a May 25 interview in Washington. Bodman said he presses ministers from the Organization of Petroleum Exporting Countries whenever he sees them to allow more investment from outside their borders to boost supplies.

Crude oil touched a record $75.35 a barrel in New York last month, having doubled in just over two years. Higher energy prices are spurring inflation, raising the possibility of interest rate increases that might harm economic growth.

Asked if rising fuel prices are a crisis in the U.S., Bodman said they are, ``if you're a working family that needs a car to get to work.'' The U.S. average gasoline pump price is up 29 percent over the past three months to $2.883 a gallon.

Algeria's Khelil

``It should be a major concern for the market, the fact that supply, especially from those countries that have the potential to increase supply, is not there,'' Algeria's oil minister, Chakib Khelil, said in a May 24 interview in Washington. He said he hopes countries including Kuwait and the United Arab Emirates will do ``their share'' to increase supply. A possible change in quotas won't be up for discussion this week in Caracas, Khelil said yesterday in Algiers, according to the state-run newspaper El Moudjahid. ``It will be devoted to studying the evolution of the market.'' The minister for Venezuela, Rafael Ramirez, said yesterday he will propose a cut in supply of 500,000 to 1 million barrels a day. For more than two decades, production quotas have been the group's main method for managing prices,

Production capacity has been steady or slowly declining in Iran, Iraq, Venezuela and Indonesia over the past two years as new investment failed to keep up with declining production from fields that were first tapped decades ago. New projects in Nigeria have been offset by attacks on existing production facilities, and the country's output has fallen.

Supply cushion

OPEC oil production rose 1 percent in April, led by gains in Iraqi output, a Bloomberg News survey showed. The 11-member group pumped an average of 30.08 million barrels a day in April, 290,000 barrels a day more than in March. April production was the highest since October. OPEC pumped 30.54 million barrels a day in October 2004, the highest since 1979.

Oil traders try to assess the amount of production capacity in OPEC to determine whether there is slack in the system to cope with supply losses caused by wars, hurricanes or political turmoil.

Excluding Iraq, that cushion was probably about 2 million barrels a day at the end of last year, down from 5 million barrels a day in 2002. World demand, led by China, has accelerated faster than expected, forcing producers to tap most of their excess capacity.

IEA's assessment

OPEC's spare oil output capacity is probably about 2 million barrels a day, acting Secretary General Mohammed Barkindo said yesterday in Caracas. That may triple by 2010 as member countries spend $100 billion on exploration and production projects, he said.

Excess capacity is concentrated in Saudi Arabia, the U.A.E. and Nigeria, said Barkindo, who is also an energy ministry official in Nigeria.

The International Energy Agency, a policy adviser to the U.S. and 25 other consuming nations, said May 12 that unused capacity from OPEC's 11 members in April was 2.79 million barrels a day. The ``effective'' spare capacity was probably just 1.7 million barrels a day, the Paris-based agency said, excluding capacity in Iraq, Nigeria, Indonesia and Venezuela that probably cannot be tapped on short notice.

The inability of Indonesia, Iran, Venezuela and Nigeria to boost production in the short term ``is one of the key drivers of current high prices,'' the IEA said.

`More should be done' ``More should be done, but I recognize that it cannot be done overnight,'' the agency's executive director, Claude Mandil, said in a May 22 interview in London. ``I am a little bit afraid that we will remain with rather low spare capacity for the next two or three years because it takes time to invest in new capacity.''

OPEC's goal of adding 1 million barrels a day of production capacity each year through 2010 may be difficult to realize because of a shortage of drilling rigs and materials such as steel pipe, the IEA said. The agency expects OPEC to add between 700,000 and 800,000 barrels a day each year through 2010.

``We see that there are big shortages in rig providers because of the huge demand, so these logistical problems are delaying some projects,'' Abdullah bin Hamad al-Attiyah, Qatar's energy minister, said earlier this month.

Saudi Arabia, the world's biggest oil exporter, has said it will raise production capacity to 12.5 million barrels a day by 2009 from about 11.3 million today. Saudi Arabia pumped about 9.5 million barrels a day last month, according to Bloomberg data.

Bodman, who visited the kingdom last year and meets regularly with Saudi oil minister Ali al-Naimi, said he believes the Saudis can deliver the output capacity they promise. ``Until proven otherwise, I take them at their word,'' Bodman said. ``Ali al-Naimi says that they're going to do this. They're investing the money and he is absolutely dead certain that they will get production up to 12.5 million barrels a day.''