Saudi oil minister sees another oil spike coming
Saudi Arabia warned the world that oil prices could spike to beyond the near USD 150 record high of 2008 within 2
to 3 years as energy leaders recently decried a blow to energy investment because of the financial crisis.
Energy ministers and officials at the Group of Eight energy summit met in Rome as oil prices hovered at a 6 month
high of USD 60 a barrel but below the USD 75 a barrel level producers say is needed to spur investment in new
production.
Mr Ali Al-Naimi petroleum and mineral resources minister of Saudi Arabia said that the world was heading for a
fresh spike after the current phase of faltering demand and lower prices, which he said reflected the economic
downturn rather than being an indicator of things to come.
Mr Al Naimi said that "We are maintaining our long term focus rather than being swayed by the volatility of short
term conditions. However, if others do not begin to invest similarly in new capacity expansion projects, we could
see within 2 to 3 years another price spike similar to or worse than what we witnessed in 2008."
He said that low prices and weak demand had discouraged investment in energy projects, while high development
costs, tight credit markets and energy policies focused on alternative fuel sources were compounding the problem.
The Saudi warning was echoed by others at the energy summit that ended yesterday with a top official of the
International Monetary Fund also forecasting price spikes over the medium term following relatively stable
markets in the short term.
Mr John Lipsky first deputy MD of IMF said that "With long time to build lags, significant setbacks to oil
investment today could set the stage for future sharp price increases."
He said that energy investments were likely to remain subdued in 2010, after an expected decline in 2009.
The International Energy Agency predicts investment in oil and gas exploration and production will fall 21%
in 2009.
Oil prices fell toward USD 61 a barrel recently ahead of a meeting of the Organization of Petroleum Exporting Countries in Vienna, where the group was widely expected to agree not to cut oil output further. US crude futures for July delivery fell 39 cents to USD 61.27 a barrel by 1712 GMT. London Brent crude shed 56 cents to USD 60.22.
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