govt wants more oil not less.......

From the HeraldSun
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Martin Ferguson says Jeddah meeting was about the long-term

June 23, 2008 08:12am
THE Opposition has accused the Rudd Government of failing to deliver on a promise to pressure oil producers at the Jeddah oil summit.

Australia, represented by energy minister Martin Ferguson, and other oil-consumer nations pushed the main oil powers overnight to increase their production, while producers demanded action against speculators blamed for recent price rises.

Prime Minister Kevin Rudd, before the meeting, had threatened to apply the "blowtorch" to oil producers.

But Opposition environment spokesman Greg Hunt says it is unlikely the Organisation of Oil Exporting Countries (OPEC) will increase production.

"They (the Rudd government) promised a blowtorch and delivered a feather. The OPEC countries will say, who was that?" he told reporters.

"The minister didn't raise a squeak when it came to oil production.

"They squibbed it. They overpromised, they underdelivered. They gave the impression of activity, and that is the story of the Rudd Government."

However, Mr Ferguson denied he had changed the Government's policy.

"If you actually go through the Australian Government's contribution and the contribution of a range of other countries, they were all focused on increasing oil production through facilitating investment and opening up countries that have embraced nationalism and prevented investment in stranded oil reserves throughout the world,'' Mr Ferguson said on ABC radio.

Asked how damaging Mr Rudd's comments had been, Mr Ferguson did not directly answer the question.

"Australia, like the global community, has sat down today and had a hard think about how we actually assist not only ordinary motorists in Australia but also developing countries to meet the challenges of increased oil prices.''

Saudi Arabia's King Abdullah condemned oil "speculators'' at the summit on the spiralling price of crude which called for greater transparency in market dealings.

Saudi output has risen to 9.7 million barrels a day (bpd), the king said, vowing to further increase production if necessary to defuse market tensions which have sent the price of a barrel of oil up to almost US$140 - sparking angry protests in several countries.

The monarch, who said Saudi Arabia would give 1.5 billion dollars to efforts to ease energy shortages in poor nations, told the 36-nation summit his country was "very concerned'' about consumers worldwide.

He blamed increased oil consumption and taxes on fuel, but added: "Among other factors behind this unjust increase in oil prices is the abhorrent act of speculators acting for their own selfish interests.''

The summit in the Saudi Red Sea city of Jeddah was the scene of an international debate over the cause of the doubling of oil prices in the past year.

The United States and other Western powers blamed production shortfalls while Saudi Arabia and other OPEC members said speculators have played a key role.

The final communique by leaders and ministers from the 36 nations called for greater regulation of oil markets and greater investment in refinining capacity.

"The transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interactions in the crude market,'' the statement said.

It added: "An appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are well supplied in a timely and adequate manner.''

OPEC was split, however, over whether to follow the Saudi lead in increasing output.

Kuwait said it was ready to increase production, but the OPEC president - Algeria's Oil Minister Chakib Khelil - insisted this was not necessary.

US Energy Secretary Samuel Bodman said, "there is no evidence that we can find that speculators are driving futures prices'' to current record heights.

He told the meeting: "Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing - and increasingly volatile - prices.''

Warning that prices would almost certainly rise further, Bodman said: "In the absence of any additional crude supply, for every one per cent increase in demand we would expect a 20 per cent increase in price in order to balance the market.''

German Economy Minister Michael Glos told the summit an increase in production would be "a strongly needed signal to the financial markets to not gamble any more on an increasing oil price.''

India's Finance Minister P. Chidambaram also called for increased output.

Kuwaiti Oil Minister Mohammed al-Olaim said OPEC members "will not hesitate'' to increase production if the market needs it.

But OPEC chief Khelil insisted there is enough oil to supply the market.

"We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply.''

Mr Khelil said the 13-nation OPEC would only consider a production increase at a meeting in September.

"We believe speculation, in its noble and not noble terms, has its impact,'' the OPEC chief said, also blaming "uncertainties on the dollar'' for the soaring price.

A Saudi source said there is scope for other countries to follow the production increase as there are up to three million barrels of spare capacity within OPEC nations.

British Prime Minister Gordon Brown called for a "new deal'' between consumers and producers, but like many Europeans at the meeting he said production shortages and speculation had to be studied.

Mr Brown said that the world was going through "the biggest of all three oil shocks'' in recent decades.

Saudi Oil Minister Ali al-Nuaimi said, however, that the world has enough crude to last "many decades'' and that Riyadh will invest 129 billion dollars to be able to produce 15 million barrels a day (bpd).

Mr Nuaimi said Saudi Arabia's production capacity will rise to 12.5 million bpd by the end of 2009 and another 2.5 million bpd could be added if demand warranted.