RIYADH, 21 October — Former OPEC chief Rilwanu Lukman yesterday defended "appropriate levels" for oil prices saying that low prices would hamper much-needed investments while high prices would jeopardize the world economy.
Lukman also hit out at some consumer countries for imposing "excessive taxation on petroleum products, accounting in some countries for as much as three quarters of the final pump price". It is in this light that the OPEC price band of $22-28 per barrel remains a viable option, he told a conference on the "Future Vision for the Saudi Economy" here yesterday, the second day of the four-day event.
"The simple truth is that low prices are incompatible with levels of investments required to ensure secure and adequate supplies envisaged for the next two decades," said Lukman, who was OPEC secretary-general from 1995 to 2000. Due to expected sharp increases in demand for oil and gas in the next decade, it is estimated that about $190 billion would be required annually to raise production capacity, mainly in non-OPEC states, he said.
"Huge capital outlay will be required to create the capacity to supply the world with the level of production" projected in the next two decades, Lukman said. World oil demand is estimated to grow from the current 76 million barrels per day (bpd) to 89 million bpd in 2010, and to more than 106 million bpd by the year 2020, a 40 percent rise in less than two decades, he said.
"World economy will continue to depend on the international oil market to meet its primary energy needs," which is expected to supply, along with gas, just under 70 percent of world energy needs, he said. Based on available indications, for most of the current decade, non-OPEC production would continue to rise steadily, with Organization of the Petroleum Exporting Countries registering very marginal increases, Lukman said.
"The second decade of the century would, however, witness a very dramatic shift in sources of supplies, as non-OPEC production reaches peak levels," he said. With nearly four-fifths of the world’s proven reserves, OPEC is well placed to meet the lion’s share of world oil demand, as estimates put OPEC supplies at 53 million bpd by 2020, a 76 percent rise over current levels, he said.
