The government and speculators should take part of the blame for
the excessively high fuel prices that pushed red diesel to
70p/litre earlier this year, according to one of the most important
men in the oil industry.
Abdalla Salem el-Badri, secretary general of
OPEC, which
controls 40% of world oil output, told a briefing in London
yesterday that very high prices did not ultimately benefit
oil-producing countries because they affected demand. “$147 a
barrel was too high,” he said.
Despite repeated requests, Mr el-Badri refused to reveal what
OPEC considered an acceptable price for its members. He said,
however, that the current price of about $60 a barrel was not
enough to sustain investment and could signal a return to higher
prices if proposed new production and refining capacity was
subsequently put on hold.
If prices failed to stabilise, OPEC would not hesitate to reduce
production again at its next meeting in December following the
1.5m-barrel cut in daily output announced in Vienna last Friday, he
added.
But Mr el-Badri said it was wrong of Gordon Brown and George
Bush to tell OPEC not to cut production during the current
financial crisis. “Why should they ask poor countries like Nigeria
and Angola to help solve a crisis that started in the US? If Gordon
Brown cared about his citizens he could cut fuel taxes,” he
said.
Peak oil prices were also nothing to do with supply and demand,
Mr el-Badri claimed. “$147 a barrel was down to speculation, not
fundamentals. When prices were at their highest there were no
queues to buy oil.”
It was unrealistic to remove speculation from the market
completely, but regulation was needed if governments wanted to curb
volatility, he said. “Companies will still need to hedge against
price changes, but if you speculate you should be ready to receive
those barrels.”
Andrew Shirley, head of Knight Frank’s rural research department, who
attended the briefing, said it was good news for farmers that OPEC
did not appear to want to drive prices back up again to
unsustainable levels.
“It is almost impossible to quantify just what impact
speculators really do have on prices and I am sure a lot of people
will be critical of OPEC for cutting production now, but farmers
would definitely appreciate anything that would bring some
stability to the commodity markets. And I think many would agree
with Mr el-Badri that we pay too much tax on fuel in the UK.”