Oil powers and consumers haggled yesterday over how much to blame market speculators for the spectacular rise in crude prices ahead of a summit on the energy crisis, officials said.
Saudi Arabia has organized a meeting of producers and consumers for today at which British Prime Minister Gordon Brown is to be a keynote speaker.
While growing demand is highlighted along with the need for greater investment in refining capacity, some nations want to blame market funds that speculate on oil futures for the rise of oil to almost US$140 a barrel, officials said.
PHOTO: AFP
A working paper for the summit’s final declaration calls for action to “improve the transparency and regulation of financial markets through measures to capture more data on index fund activity and to examine cross exchange interactions in the crude market.”
A senior international energy official involved in the summit talks called the document “highly controversial” because of the attack on markets.
The document says that index funds and other investors have “unrealistic assessments” of the future value of oil.
The senior energy official said that the attack may be toned down in the final document of the Jeddah Energy Meeting today because of opposition from the US and other major industrial powers.
Saudi Arabia is believed to be a supporter of the movement to put pressure on market players.
Ibrahim al-Muhana, a top adviser to Saudi Arabia’s oil ministry, told a press conference in Jeddah on Friday: “The emergence of new players has made it difficult for us to put our fingers at a clear reason” for the price rise.
Saudi media quoted him as attributing the rises to increased market speculation on oil.
The oil powers have sought to divert calls for greater production, despite Saudi Arabia’s promise to produce an extra 200,000 barrels a day.
Organization of Petroleum Exporting Countries (OPEC) president Chakib Khelil said “just because car and computer prices were high, would one ask their producers to make more?”
The summit document calls for improved information gathering by groups such as OPEC, the International Energy Agency and the International Energy Forum “to improve transparency” and better assess “the impact of financial markets on the level, volatility of oil prices which can be used to better understand the market situation.”
The different forecasts on production and consumer needs produced by the different groups “send mixed signals to the market,” fueling fears about oil supplies, the international energy official said.
The draft calls for international action for “reducing uncertainties” and “necessary actions to ensure stability and sustainability of the energy system.”
It says increased refining capacity is needed because new construction has been shackled by “constrained refining investment, environmental standards, cost inflation and stringent laws and regulations, resulting in poorer refining returns.”
“Spare capacity throughout the oil supply chain is important for the stability of the global oil market, hence an appropriate increase in investment both upstream and downstream is necessary to ensure that the markets are supplied in a timely and adequate manner,” the document says.
The final declaration is also expected to call for greater assistance from governments, institutions and regional groups to “alleviate the consequences of higher oil prices on the least developed countries.”
The senior international energy official said: “We want to cool down markets. Saudi Arabia is really concerned. They are after stabilization because if the world economy goes into recession that will hurt oil demand.”
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