Oil price of $40 no help to world economy: OPEC
Sunday, 8 March 2009
VIENNA, March 7 (AFP): Prices of around 40 dollars a barrel will dampen oil-infrastructure investment and will not be a long-term benefit to the world economy, contrary to an assessment by the International Energy Agency (IEA), oil producers said yesterday.
"The IEA has said that the world would get a trillion-dollar economic stimulus if oil prices stay at around 40 dollars a barrel through 2009," OPEC chief Abdalla Salem El-Badri said in a statement.
On Friday, New York's main futures contract, light sweet crude for delivery in April, was at 44.71 dollars a barrel and Brent North Sea crude for delivery in April stood at 44.33 dollars, a long way from the record highs of around 147 dollars seen last July.
"The moderation of prices since last summer's extreme certainly offers some short-term relief to consumers. However, if the current low price environment persists, this short-term relief may not translate into long-term gain," El-Badri insisted.
"We all want to see the global economy back on its feet as quickly as possible," the cartel chief insisted.
But "oil prices need to be at levels to help sustain economic growth, by supporting longer-term energy industry investments across the board. Low oil prices inevitably mean less investment," he argued.
Saudi Arabia, the leading producer in the Organisation of Petroleum Exporting Countries, has estimated that a price of around 75 dollars would be "fair."
Even the IEA, which represents oil consumers, had recognised that a lack of investment now by OPEC "threatens a supply crunch around 2013, and a price surge," El-Badri continued.
IEA's position was therefore "confusing and misleading: whilst asking for prices to remain at 40 dollars, it also wants investments to be made that are not economically viable at these prices. It is a short-sighted view," the OPEC chief said.
"OPEC remains committed to ensuring a stable, sound and sustainable oil industry, and upholding its investment plans when it makes business sense."
"The IEA has said that the world would get a trillion-dollar economic stimulus if oil prices stay at around 40 dollars a barrel through 2009," OPEC chief Abdalla Salem El-Badri said in a statement.
On Friday, New York's main futures contract, light sweet crude for delivery in April, was at 44.71 dollars a barrel and Brent North Sea crude for delivery in April stood at 44.33 dollars, a long way from the record highs of around 147 dollars seen last July.
"The moderation of prices since last summer's extreme certainly offers some short-term relief to consumers. However, if the current low price environment persists, this short-term relief may not translate into long-term gain," El-Badri insisted.
"We all want to see the global economy back on its feet as quickly as possible," the cartel chief insisted.
But "oil prices need to be at levels to help sustain economic growth, by supporting longer-term energy industry investments across the board. Low oil prices inevitably mean less investment," he argued.
Saudi Arabia, the leading producer in the Organisation of Petroleum Exporting Countries, has estimated that a price of around 75 dollars would be "fair."
Even the IEA, which represents oil consumers, had recognised that a lack of investment now by OPEC "threatens a supply crunch around 2013, and a price surge," El-Badri continued.
IEA's position was therefore "confusing and misleading: whilst asking for prices to remain at 40 dollars, it also wants investments to be made that are not economically viable at these prices. It is a short-sighted view," the OPEC chief said.
"OPEC remains committed to ensuring a stable, sound and sustainable oil industry, and upholding its investment plans when it makes business sense."