JEDDAH: With 36 countries in attendance at the Jeddah Energy Summit, from producers to consumers and the global oil majors, representing varying interests, groups and point of views, diversity in opinion was sure to be order of the day.
And that remained so.
With tension in the air and atmosphere charged at the convention center, there was bound to be differences. And the differences started to get out in open pretty early in the day.
US Energy Secretary Samuel Bodman told the august gathering that market fundamentals confirmed that production was not pacing with the growing demand for oil, resulting in increasing — and increasingly volatile — prices: “Since 2003, global demand — fed by worldwide economic growth — has increased significantly... World oil consumption growth has averaged 1.8 percent per year, with the largest share of that increase from non-OECD countries, especially China, India and in the Middle East. But for the past three years global oil production has remained constant at roughly 85 million bpd. OPEC production has largely remained flat while non-OPEC supply growth has been well below the levels just seen four years ago.”
Bodman then insisted: “Our two main cushions against price volatility — spare capacities and inventories — have been severely strained... In my judgment, this reality of fundamentally tight market conditions is the major driver of the dramatic price increases we have seen over the past five years, and particularly in the recent months.” Admitting the speculators could be one of the reasons for the current situation, he clarified: “The capital is following the oil market upward — not leading the movement.”
However, not everyone seemed to agree with him. Ali Al-Naimi was straight to the point: “A year ago prices were in the range of $65 a barrel; now they are almost double that. What has happened during this relatively short period of time? Clearly something other than supply-demand fundamentals is at work here.”
And indeed blaming the market fundamentals — supply and demand — is not working. In fact the fundamentals are not bad as is being depicted in certain quarters. A diplomat friend attending the conference — interestingly representing the consumers — hinted that the sales of one of their leading oil companies has gone down by almost 30 percent this year, as compared to the last year — indicating softening of the markets. High prices are taking their toll.
And if this trend sets in, blaming the fundamentals is not going to work. Speculators or no speculators, refining constraints or no constraints, peak oil or no peak oil, one could keep debating about all these for long.
Yet the fact remains that rather than just taking the refuge behind fundamentals, the energy fraternity is in the need of finding out the real culprit.
And only then would it be able to tame the bull. Let everyone in the industry be transparent and this would take care of more than half of the issues. Is it easy enough to be so transparent?