World energy powers embarked on a new level of dialogue to rein in runaway oil prices at an emergency meeting in the Red Sea city of Jeddah on Sunday, but were unlikely to come up with a quick fix.
Host Saudi Arabia vowed to pump yet more oil in response to consumer countries’ requests, but said that alone would not be enough to calm a market driven by an array of factors.
”In this critical hour, the world community should rise to its responsibility and cooperation should be the cornerstone of any efforts,” Saudi King Abdullah said at the meeting, calling for a global ”energy for the poor” initiative.
He promised $500-million in soft loans and called for a $1-billion Organisation of the Petroleum Exporting Countries (Opec) fund to help the world’s poor cope with soaring prices that nearly hit $140 a barrel last week.
The cost of crude has doubled in a year — fuelling inflation around the globe and sparking protests from Asia to Western Europe. To curb the rising cost of fuel and food, the world’s major central banks may start raising interest rates.
Concrete measures were unlikely to emerge from major producers, consumers and leading oil company executives gathered here to reverse what some see as the world’s third oil shock.
”What I’ve heard so far are basically all good ideas, but it will probably not change the price tomorrow morning,” Royal Dutch Shell CEO Jeroen van der Veer said.
The Shell CEO and others here took part in a similar session two months ago in Rome, but producers and consumers failed to agree publicly that oil prices were too high.
But oil’s near-$20 rise since then has all in open harmony over the exorbitant cost of fuel. ”What we’ve got here … is agreement that the oil price is too high,” British Prime Minister Gordon Brown said on Sunday.
Recent efforts to slow oil’s ascent have had little impact. Saudi Arabia, the world’s biggest oil exporter, has already vowed to raise production to 9,7-million barrels per day (bpd) in July, its highest rate in decades.
The kingdom’s Oil Minister, Ali al-Naimi, promised on Sunday to supply still more should customers want it, but he said pumping more crude was unlikely to cool prices.
”I am convinced that the supply-and-demand balances and crude oil production levels are not the primary drivers of the current market situation and that markets are already well-supplied,” he said in a speech. ”A simplistic focus on supply expansion is therefore unlikely to tame the current price behaviour.”
Sceptics
Some are sceptical that boosting output will curb prices governed more by speculation than supply and demand.
”I think it’s going to be virtually impossible to find a set of solutions at a meeting like this that will ease high prices in the short-term,” said analyst Raad Alkadiri, of PFC Energy. ”This is about market sentiment, and this meeting is probably not enough to change the market sentiment, which is clearly bullish. There clearly is no silver bullet.”
King Abdullah told the meeting that Riyadh was willing to provide all necessary oil supplies needed in the future, and blamed high prices on speculation and taxes.
Major oil consumers in Asia, including the world’s number-two user, China, have recently raised cheap domestic fuel prices that analysts say aided rapid demand growth.
United States regulators are seeking more oversight of futures market speculators.
Fresh ideas appeared in short supply on Sunday, with the final communiqué likely to focus on the importance of greater transparency in oil markets and more investment into production and renewable energy sources.
”There is the danger that the markets will be disappointed and the price will increase again,” said German Economy Minister Michael Glos.
Wider Opec action unlikely
A Gulf Opec official said on Saturday the meeting would discuss a proposal for an output boost from other Opec members who can bring on extra production quickly, namely the United Arab Emirates and Kuwait. But others said such a move was unwarranted and unlikely.
”The market is well supplied and more production will go into storage; there is no more demand,” Iranian Oil Minister Gholamhossein Nozari said.
The meeting also highlighted the divide between those who say high oil prices are the result of soaring demand and slower growth in production and those — including most in Opec — who see speculators as the primary force behind the rally.
Investment funds have pumped billions of dollars into oil and other commodities as they seek to diversify holdings and flee poorly performing asset classes, but US Energy Secretary Sam Bodman said that the focus on speculation was misplaced. ”There’s no evidence we can find that speculators are driving futures prices,” he said on Saturday.
US regulators, under political pressure from lawmakers, have stepped up oversight of futures markets in an apparent effort to temper the influx of speculative funds. — Reuters