Global markets are best solution to World's current oil price challenge
Speaking at the weekend meeting of officials from OPEC oil exporters and
consumers in Jeddah, Saudi Arabia, BP CEO Tony Hayward delivered a clear
message on what is needed to tackle current record prices
Speaker: Tony Hayward
Title: BP Group Chief Executive
Type: doc | Size: 58 KB
Date: 22 June 2008
Theme: Energy outlook
Venue: Oil exporters and consumers meeting, Saudi Arabia
Thank you very much for the invitation to speak to such a distinguished
audience. I am grateful for the opportunity to share our experiences and
views.
My message in brief is that:
*
the world is not short of oil and gas;
*
that today's high prices are caused by economic fundamentals,
with supply struggling to respond to demand;
*
and that the solution is to let the global market work to
encourage investment by produc-ers, supported by governments.
1. The world has enough resources
First, I trust we are all agreed that the world is not short of oil, or
of hydrocarbons more gener-ally. The problems in bringing on new
production appear to be less below ground, but above it; and not
geological, but political.
2. High prices are caused mainly by fundamentals
We share the belief that the current high price of oil results from a
shift in economic fundamen-tals.
The world has just seen the strongest period of economic growth for
almost 40 years, and this growth is driven by industrializing countries
whose incremental energy needs are large.
The contribution of non-OECD countries to global economic growth has
doubled to above 40% since the early 1990s, whereas their contribution
to global energy demand growth over the same period has climbed to 90%.
That shows how growth outside the OECD is much more energy intensive.
And consequently, other commodity and fuel prices have risen as well -
and whether they are subject to financial investment or not. Traded
coal, for example is up about 200% since 2003.
About a quarter of total demand last year was sheltered by subsidies.
These are becoming increas-ingly difficult to sustain for many countries
in the developing world. Energy poverty threatens to become an issue,
once again
Yet energy supply has struggled to respond. OPEC production fell by
350,000 barrels of oil a day last year. The situation is challenging in
the market oriented nations of the OECD as well, where many existing
basins are maturing fast.
Another big impact on supply is Russia, where production has begun to
decline. It is a little known fact that, until now, the growing demand
for oil from China and India in recent years has been met almost barrel
for barrel by rising supply from Russia.
Access to resources for international oil companies remains very
restricted. Resource nationalism is on the rise. That is important
because it is the oil majors which have some of the best technol-ogy for
bringing difficult resources onstream across different geological
conditions.
High prices are not caused by factors such as speculation. - but by the
fundamentals of demand and supply. Of course, in the oil market, just
as in any market, these factors have the capacity to accelerate existing
price movements up or down. But the data show that today's prices are
mainly driven by economics.
3. The solution is to let the market work
So what are we to do about high oil prices and also to secure the energy
needs of the world in the 21st century?
The evidence is that where markets are allowed to operate, they do work.
This is a real source of hope for the future. Consumers are already
responding to high prices by moderating demand. They are beginning to
embrace energy efficiency. In difficult times, energy security has been
maintained, served best by trade and well integrated, global energy
markets. Where investment is allowed to take place, energy production
responds positively. Last year, US oil and natural gas production
increased-in the case of oil, for the first time since 1991.
The conclusion is therefore simple. Producers and consumers should be
encouraged to respond to the market's signals. High prices are saying
that we need more investment - in energy effi-ciency, new production,
new technology, and new energy sources such as wind, solar and nuclear.
In order for that to happen, businesses and Governments must act
together. Companies know that they need to invest more, which is why BP
and its peers have been raising capital expendi-ture substantially. But
Governments must do their bit too, by removing the barriers to that
in-vestment, improving access to resources and modernising the tax
structures we work in.
Thank you very much.
Holland H. Simanjuntak
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Voice: +84 (8) 899 9375 Ext. 2242
Cell: +84 (90) 300 2310
Email: [EMAIL PROTECTED]
