Brussels, 23/06/2009 (Agence Europe) - Meeting in Vienna on Tuesday 23 June for the 6th meeting of EU/OPEC energy dialogue, ministers representing the 27 EU member states and oil exporting countries agreed that the oil market would be faced with a new speculative bubble, unless there were reform of the financial sector and better transparency. “The 2008 bubble could be repeated if adequate regulatory reforms, including greater transparency, were not made as part of an overall reshaping of the global financial sector”, they state in their final joint declaration. EU and OPEC ministers also agreed that the role of speculation on the financial markets had not been settled. While the EU places emphasis on the role of insufficient supply to meet market needs, OPEC for its part frequently blames speculation for being at the origin of surging prices. “Since early 2008, we have warned the world of the existence of a bubble. We need some kind of regulation”, stressed Abdalla Salem El-Badri, Secretary General of OPEC, speaking to the press after the day's business. He gave his assurance that OPEC was willing to provide, “at any moment”, the oil that the world needs “however much is demanded”. “We are in a situation of production surplus”, he said, adding that there was no problem with regard to supply security. According to Mr El-Badri, the OPEC countries currently meet 75% of production quotas fixed during their meeting last December in Oran, Algeria. Since then, despite reductions decided, OPEC has not modified its quotas and at each of its meetings it has called for them to be better applied.
EU and OPEC ministers agreed that the current rate, around $70, did not threaten economic recovery. At the most recent OPEC conference last May, Saudi Arabia estimated that the rate this year could reach $75 the barrel and that the economy would be able to handle it. Mr El-Badri, the Angolan oil minister and acting president of OPEC, José Botelho de Vaconcelo, claimed that even a barrel at $80 would not threaten international recovery. According to OPEC, uncertainties appear when the price of crude per barrel goes above $100. The Europeans represented in Vienna by the Energy Commissioner, Andris Piebalgs and the Czech minister for industry, Vladimir Tosovsky, said that $80 per barrel would be of concern to the world economy whereas $70 would not be damaging. Piebalgs stated that, “we agreed during our meeting that a price of $70 per barrel, the current level, would not harm economic recovery at all. We are sure that the current situation is stable. If this continues, we will have a chance of recovery and this will guarantee the continuation of upstream investment”. OPEC considers that a level that is too low threatens investment in new oil wells. In a joint declaration, the cartel warns that an inability to develop new exploitation capacity would run the risk of perpetuating speculative bubbles.
In their joint statement, ministers hail the progress made since the last meeting in Brussels in June 2008 (see EUROPE 9689), where they agreed to convene a round table meeting on carbon capture and storage (CCS) in Brussels at the end of October 2008, to carry out a study of the impact of financial markets on the oil price and volatility followed by a workshop in Vienna in Vienna at the start of 2009, and to carry out a feasibility study on setting up a joint EU-OPEC energy technology centre and preparation of a mandate for a joint study on refining.
In a section devoted to mutual understanding of EU and OPEC energy policies, the oil cartel says that the economic recession, along with new laws and regulations in many consumer countries, had added to long standing uncertainties about future demands. “This could have implications for future upstream and downstream investment requirements,” OPEC warned, admitting, nonetheless that fossil fuels, principally oil, would continue to meet most of the world's energy needs.
In addition to their restated commitment, in the run-up to the climate conference in Copenhagen in December, to sustainable development and the use of clean technologies, such as CCS, ministers agreed a work programme for the period until the next EU-OPEC meeting scheduled to be held in Brussels in June 2010: - launch and conduct of the study on the impact of biofuels on the refining industry, including organising a workshop to discuss the findings of the study; - organisation of a roundtable on the impact of the global financial crisis on investment in exploration and production; - carrying out the feasibility study for the EU-OPEC Energy Technology Centre. (E.H./transl.jh/rh/rt)