Global Oil Summit Addresses Issues But Produces Few Solutions
June 23, 2008
A summit held June 22 in Saudi Arabia to discuss spiraling oil prices concluded in an ambiguous fashion as attendees left the meeting with largely different opinions and agendas.
Although he blamed increased oil consumption and taxes on fuel, King Abdullah of Saudi Arabia used the meeting attended by leaders and ministers from 36 nations to blast speculators, claiming the spike in oil prices can be greatly attributed to their "selfish interests." With the current price of a barrel of oil now at a high of roughly 130 US dollars, he urged the summit participants to "rule out biased rumors" and to "reach the real causes for the increase in price."
Saudi Oil Minister Ali al –Nuaimi also used the summit in the Red Sea city to quell any fears about depleted oil reserves, claiming that there is enough crude to last "many decades." With Saudi oil output currently at 9.7 million barrels a day, Abdullah vowed to increase oil production should this become necessary. Kuwait and the United Arab Emirates similarly signaled their readiness to up production in the future.
Oil producers say production hike unnecessary
Other OPEC (Organization of Petroleum Exporting Countries) members such as Algeria and Venezuela, however, rejected this idea, as did Chakib Khelil, OPEC president and Algeria's Oil Minister. Khelil insisted that increasing production is unnecessary, stating that the 13-nation OPEC would only consider a production increase at a meeting in September. "We believe that the market is in equilibrium," he said. "The price is disconnected from fundamentals. It is not a problem of supply."
Glos calls for increase in production
German Economy Minister Michael Glos was one leader who had positive feedback to offer regarding the summit. "I view this conference as sending a clear signal to the oil market, which can contribute to an easing of the recent price developments," he said.
Glos also agreed with Abdullah that an increase in production is in order, claiming it would be "a strongly needed signal to the financial markets to not gamble any more on an increasing oil price."
US Energy Secretary Samuel Bodman echoed Glos' sentiments, warning that "in the absence of additional crude supply, for every one percent increase in demand we would expect a 20 percent increase in price in order to balance the market."
Referring to the staggering oil prices as "the biggest of all three oil shocks" in recent decades, British Prime Minister Gordon Brown called for an analysis of production shortages, as well as the speculation aspect cited by King Abdullah.
Brown however disagreed with the King's assessment of the causes for rising prices, pointing to the economic scenario of "oil demand rising faster than supply" as the root of the problem. Bodman similarly dismissed Abdullah's claim that higher prices are connected to speculation, stating that "there is no evidence we can find that speculators are driving future prices."
UK's Brown advocates nuclear as alternative to oil
Brown placed an emphasis on diplomacy as he called for a "new global deal" that would enable a "greater commonality of interest" between oil consumers and producers.
He also underlined the need for more investments in nuclear and renewable energy, calling for the construction of 100 new nuclear power plants and an additional 700,000 wind turbines worldwide by the year 2050.
The price of a barrel of oil ten years ago was at ten US dollars.