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Energy experts puzzled over oil prices

(Agencies)
Updated: 2008-07-02 20:57

His comments reflected the high-level bedevilment at the meeting about what is causing prices to sizzle.

In Jeddah, Saudi Arabia, earlier this month, the kingdom said it would add 200,000 barrels per day in July to a 300,000 barrel per day production increase it first announced in May, raising total daily output to 9.7 million barrels. Production increases normally check prices, but the market has shrugged off the Saudi gesture and set several new records since.

Khelil, the OPEC president, offered no solace to consumers.

"We are very uncertain about the oil prices since it's highly volatile and we don't really know whether it is going to be stabilizing or going to lower levels," he told delegates. "But everybody agrees that oil prices are too high."

"There is a lot of uncertainty about demand," Khelil said. "Consequently there is a lot of uncertainty about the decision of investing" the tens of billions of dollars needed to make additional crude and refined supplies available.

He identified the main driver of prices as the weak US dollar and the linked subprime crisis in America; geopolitical tensions, and increased emphasis on US bioethanol production which he suggested diverted production of diesel and led to shortages.

Urging the world to brace for a "really big reshuffle" in energy expectations, Christophe de Margerie, CEO of French energy giant Total SA, said he expected oil production to plateau in just 12 years at 94 million barrels a day -- less then 10 million barrels more than available now. And he warned the forecast was optimistic.

"We will have to fight against the natural decline of (present) oil fields," he told the same forum Khelil attended. "It will not go smoothly."

Producers and refiners in the Spanish capital are also looking to find answers not only on how to ensure stable supply, but also on doing it in a way that minimizes emissions of the greenhouse gases believed to cause global warming.

Still the primary concern at the meeting was over availability and prices that have been bouncing from record to record over the past few months -- a worry echoed by de Margerie.

Consumers worldwide "expect a better environment," he said. "But they expect first access to energy."

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