The Guardian: High oil price is not a weapon, says Opec

Terry Macalister

· The $100 barrel is hurting producers, says cartel boss
· Increasing output ‘will not solve world’s problems’

Terry Macalister in Riyadh 
Thursday November 15 2007

The head of Opec said yesterday that oil prices at close to $100 a barrel were hurting producers as much as consumers and there was no question of energy being used as a “weapon” to damage western economies.

Abdalla Salem El-Badri, the cartel’s secretary general, suggested oil production levels could be discussed at a meeting in Abu Dhabi next month after appeals overnight from the US energy secretary, Samuel Bodman, for more crude to be made available.

Arguing the need for $150bn (£75bn) of new investment to be made in Opec oilfields to meet soaring demand over the next eight years, El-Badri said there was no way to counter global warming without “new technology” being found.

The secretary general insisted it was not Opec policy that had raised the average price of oil this year to $70.

“People think we are setting prices. Actually, we are not. We are only market takers,” El-Badri said at a press conference in Riyadh before a meeting of Opec members in Saudi Arabia, the world’s biggest oil-exporting nation.

“Let me stress – I don’t know how many times I have said this – Opec is not in favour of high oil prices. Opec is not in favour of low oil prices. We would like to see a stable market.”

Some people saw soaring crude values as a “bonanza” for producers, but this was not the case because the cost of producing oil had risen by more than 55%. The real causes of high oil prices were lack of investment in refining capacity, the low dollar and other factors.

Asked whether it was fair for Opec and Russia to be accused of using energy as a political weapon, the Opec boss said: “We are not really using the oil that we are selling to the world as a political weapon. We never used this in the past or in the future.”

Opec had its own difficulties to deal with, notably security of demand, he said. Consuming nations needed to realise that producing nations had competing demands on its investment resources, such as education and healthcare.

El-Badri said it would be up to ministers to decide at the December meeting in Abu Dhabi whether to raise output targets. The cartel has a production ceiling, a strategy that has been endlessly criticised in the west, most recently by Bodman.

But El-Badri said that, in his view, there was no need for output to be raised because there was enough supply.

He said there was no “silver bullet” for climate change. “Let us find technology,” he said. “Without a new technology, I do not think we can solve this problem.”

Leading oil executives, such as Shell’s chief financial officer, Peter Voser, appear to agree with Opec that speculators, rather than a lack of oil, has fuelled the latest price surge, but no one has proposed a solution. “They are like ghosts,” said Qatar’s oil minister, Abdullah al-Attiyah. “How are you going to fight a ghost?”

Oil prices rose yesterday after falling for the past two days, supported by El-Badri’s views on production and expectations of a fall in US supplies. Brent crude gained $1.78 to end the day at $90.61 a barrel.

http://www.guardian.co.uk/business/2007/nov/15/oil

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