G8 Encourages Energy Investment to Prevent Surge in Oil Prices
Reduced spending on energy would slow the economic rebound, trigger a surge in prices and hurt future prosperity, the Group of Eight industrialized nations said at the close of their meeting in Rome.
“The current financial and economic crisis must not delay investments and programmed energy projects which are essential to economic recovery and sustainable prosperity,” ministers from the G8 and 15 other countries including Saudi Arabia, China and India said in their concluding statement yesterday after a three-day meeting.
The global economic slowdown has restricted credit for new energy projects and eroded demand for fuels, leading to a 58 percent slump in crude prices from their high of $147.27 a barrel in July. Oil companies’ spending this year dropped almost $100 billion, or 21 percent, according to a report this month from International Energy Agency.
Oil prices may jump in four to five years because energy companies, fighting the worst recession in more than six decades, are cutting investment in new projects, IEA Chief Economist Fatih Birol said in the report.
The G8 gathering included 23 energy ministries, 18 executives of energy companies and OPEC members Saudi Arabia, Algeria, Libya and Nigeria.
Their ministers will be traveling to the Organization of Petroleum Exporting Countries meeting in Vienna on May 28 to consider changes in production quotas. Shokri Ghanem, chairman of Libya’s National Oil Corp online cash advance., said in an interview there is a 50 percent chance that OPEC will decide on new limits at the meeting. Most of his colleagues excluded the chance for a change in policy at this week’s gathering.
‘First Signs’
Algerian Energy Minister Chakib Khelil said at the closing G8 press conference that production will likely be untouched so OPEC can avoid damping an economic recovery.
“I don’t think OPEC members would like to hurt the first signs of economic growth, because they are dependent on that growth,” Khelil said.
Saudi Arabian Oil Minister Ali al-Naimi told reporters in the lobby of his hotel that he expects OPEC “to stay the course.” He raised doubts about starting production in new oil fields until his country can boost output from its current 8 million-barrels-a-day quota. Naimi said Saudi Arabia’s capacity will stand at 12.5 million barrels a day by the middle of June.
He implored other countries and companies not cut back on investments.
“If others do not begin to invest similarly in new capacity expansion projects, we could see within two to three years another price spike similar to, or worse than, what we witnessed in 2008,” Ali al-Naimi said in a speech published by state-owned news agency SPA.
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