US and EU warn oil states of global economic harm from high prices
The United States and Europe sounded a warning to oil producers on Saturday that soaring crude prices are damaging the world economy, particularly in developing nations.
US Energy Secretary Bill Richardson, a hardline proponent of OPEC production hikes, led the charge calling for oil at $20-25 a barrel. He noted the cartel still had the "capacity to lower prices" despite four output increases this year.
"Thirty dollars is excessively high," Richardson told a press conference on the second day of the 7th International Energy Forum in the capital of Saudi Arabia, the world's biggest producer and exporter.
"It hurts consuming countries, especially developing ones," Richardson said. "We should not accept $30 a barrel." However he added that $10 a barrel was too low and Washington "favoured a price of $20-25 a barrel, a price between $10 and 30 that is constant and is not fluctuating."
"Stocks remain too low ... while demand is excessively high," said the US energy secretary, representing the world's biggest oil consumer. He did not rule out a further release from the US strategic reserves.
But Kuwait's oil minister, speaking to reporters after returning home from the forum, said it was the market that should determine prices.
Sheikh Saud Nasser al-Sabah said "industrialized countries had always asked us to allow market forces to work. Now, we are demanding the same. (It is a process of) supply and demand." "I believe that having a fixed price for oil is difficult, if not impossible, to achieve," Sheikh Saud said. "The current situation is what the oil market demands, and any calls to fix the price are simply wishes."
He said supply and demand are now stable, but expressed fears that oil prices might collapse in the first quarter of next year if stocks increase. Prices have soared above $35 in recent weeks and remain well above $30 on concerns mainly about supplies, worsened by Middle East tensions and fears over Iraqi intentions.
French Industry Minister Christian Pierret, whose country holds the rotating EU presidency, called for "reasonable" prices. In an interview, Pierret told AFP a reasonable price was about 25 dollars a barrel, as mooted by numerous producers and OPEC.
This would "encourage companies to invest in creating the production capacity required," and "which do not block the road to economic development by the emerging countries." "The sudden rise in oil prices since the beginning of 1999 is worrying," Pierret told the forum in a speech.
France estimates "a one percent rise in inflation can be directly attributed to last year's rise in oil prices". The price increase "also cut 0.2 percent off the growth rate of the developed countries over the same period."
For the developing nations, India's Petroleum Minister Ram Naik pleaded for lower crude costs.
"There is an urgent need to take the necessary steps to bring down oil prices." He urged OPEC "to consider a favourable pricing mechanism for the developing countries that may include deferred payments, soft
loans and other similar measures."
Any hopes of alternative energy sources relieving the pressure in coming years were scotched by the world's energy watchdog. The International Energy Agency (IEA) forecast oil demand will increase dramatically over the next 20 years and that OPEC countries in the Middle East will remain key producers.
Robert Priddle, executive director of the Paris-based IEA, said "the volume of world oil demand is projected at close to 115 million barrels per day (bpd) in 2020, compared to 76 million bpd in 2000."
"There is a very strong role for oil that continues to grow in demand," he told reporters at an advanced launch of the IEA's World Energy Outlook-2000.
"The projections outlined here point to a fossil future, a continuing strong role for oil as a transport fuel and a further expansion of international oil trade.
"There is little doubt that Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates and Qatar have the resources to produce what the world will need from them. The key will be for them to attract sufficient, sustained and timely capital investment."
The Riyadh forum has gathered around 400 delegates, including many energy ministers, to seek better cooperation between consumers and producers at a time when oil prices have hit heights not seen since the 1991 Gulf War. Delegates, however, do not expect any increase in oil supplies from the forum.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)
- Crude oil prices rise as fears over Israeli attack on Iran and the global economic outlook cause uncertainty
- Iran threaten to suspend oil export to US
- High oil price raises spectre of recession
- GCC Investment Strategy and Sectors Outlook for 2006
- India to Urge OPEC to Extend Discount Rates to Developing Nations