President of the Organisation of the Petroleum Exporting Countries (Opec) Chakib Khelil said on Tuesday that the oil cartel had concerns that future demand for oil might not be strong enough to justify investment to boost oil production.
“The concern we have is about the security of demand,” Khelil, who is also Algeria’s Energy Minister, told delegates at industry event the World Petroleum Congress in Madrid.
He said there were “big uncertainties” about making huge investments in infrastructure to increase output from Opec member countries, which pump about 40% of world oil.
Benchmark oil prices hit record high levels above $143 a barrel on Tuesday amid growing public anger at the rising cost of fuel worldwide and concern about the impact on inflation and economic growth.
Consumer countries are clamouring for higher output from Opec and keen to see investments in future capacity to deflate the market, but the remarks from Khelil underline the resistance in many oil-producing countries.
The uncertainty about future demand arises from increased investment in alternative sources of energy, the impact of energy conservation, falling economic growth and the stepped-up search for non-Opec oil reserves.
Each of these factors could reduce future demand for oil from Opec and the cartel needs to see “a credibility of future demand”, Khelil said.
He stressed that financial market turmoil, which has led to projections of lower global growth and a possible recession in the United States, had already had an impact on investment in oil production and refining.
“We see the looming financial crisis having an effect on investment upstream and downstream,” he told delegates during a debate entitled “Deliverability Challenges: Security of Supply and Demand Perspectives.”
Khelil, a generally hard-line member of the organisation, has led members within the organisation in blaming speculators and the fall in the dollar for record prices.
Nevertheless, most economists and the International Energy Agency, the industrialised world’s energy watchdog, expect oil demand to continue to grow strongly, driven by economic development in Asia and the Middle East.
There are signs of weakening oil demand in developed markets, but China, India and other fast-developing countries are expected to more than compensate. — AFP