RIYADH, 12 October 2005 — High oil prices are probably impacting global economic growth and consumer countries should do more to encourage investment in the oil industry, Saudi Arabia’s central bank governor said yesterday.
Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency, told Reuters Saudi Arabia was particularly concerned about the impact of expensive oil on developing countries.
“At the current level it is probably having an impact on the growth of the world economy,” Al-Sayari said in an interview. “The real concern is the impact on developing countries. That is of concern.” US crude oil has hit record highs this year and traded over $60 a barrel for several weeks, prompting predictions that the higher energy costs will cut growth across the world. Four months ago Al-Sayari said oil prices had not at that stage made a visible impact on the global economy.
US Treasury Secretary John Snow, who will attend a meeting of G-20 finance ministers and central bankers including Al-Sayari in Beijing this week, said yesterday prices are “way too high”.
Saudi Arabia, the world’s biggest oil exporter, has offered to pump an extra two million barrels of crude a day to calm the oil markets but says it has had no response from customers.
Al-Sayari repeated Saudi Arabia’s case that shortage of refinery capacity, not crude production, is driving prices up and blamed what he said was unfair taxation of the oil industry by many industrialized nations. “The negative attitude of some of the countries towards oil creates uncertainty and discourages investment, which leads to the shortage in the infrastructure,” he said. “...The policies have a lot to do with discouraging investment and that should be addressed - to encourage investment in the whole process.”
“Whenever the price goes up then the blame is put on the oil companies and countries. And when the price goes down they jack up their taxes,” Al-Sayari said.
Singling out Britain, whose Chancellor of the Exchequer Gordon Brown has repeatedly urged oil producers to increase output to bring prices down, Al-Sayari said even at $60 a barrel oil only accounts for 20 percent of the cost of a liter of British petrol. “The rest is taxes and refining,” he said.
Al-Sayari declined to say what he believed would be a fair price for oil, but the rate of increase in prices was a worry. “There are indications - but it is too early to say - but the general feeling is that it is very high,” he said.
“The fear and the concern was (over) of the speed of the increase. There was serious concern.” Al-Sayari said it was not in Saudi Arabia’s interest for oil prices to be too high. “It would have a negative impact on demand. And of course it would have a positive impact on alternatives which would affect the market,” he said.