Paris: Saudi Arabia’s oil minister believes oil prices are set to stay above a minimum price of $60-70 (Rs2,394- 2,793) per barrel, signalling a new era for world energy markets, he said in an interview released Sunday.
Ali al-Naimi, one of the most influential people in the business as oil minister for the world’s biggest crude producer, said “a line has been drawn below which prices will not fall.”
His explanation to French oil newsletter Petrostrategies was technical, based on the idea that public policy in many countries was to invest in alternative energy sources to compete with crude.
These government-backed alternative sources such as biofuels — but also alternative oil sources in Canada’s tar sands, for example — can only compete with crude if oil prices stays above $60-70 a barrel.
“If you take all the subsidies that go into producing a barrel of biofuels, I doubt that anybody can make money in that business with a price less than 60 or 70 dollars,” Naimi said.
“And therefore a line has been drawn below which the price cannot fall.”
He said the price, which is high by historical standards, resulted from the policy objectives of having diversified energy sources.
“There is a cost to that. That cost determines the level at which the price of energy is going to be,” he said.
Oil prices are currently trading at an unprecedented level of more than $100 a barrel, heaping pressure on Saudi Arabia and other members of the Organization of Petroleum Exporting Countries (Opec) to increase production at their meeting this week.
Saudi Arabia is the leading member of Opec, which collectively produces about 40% of world oil, but Naimi gave nothing away about the output meeting on Wednesday.
Asked whether Saudi Arabia had an idea of what should be done by the group, he replied: “No we don’t. We will go into the meeting with an open mind.”
The 13 members of the group had to look at data on the oil market in a scientific way. “Everything you hear— some say we will maintain production, some say we should reduce it—all that is just a matter of opinion,” he said.
Naimi said that Saudi Arabia would have production capacity of 12.5 million barrels per day (bpd) at the end of 2009, from 11 million bpd currently, with spare capacity of 1.5-2 million bpd.
He also said that the country, which already has the biggest proven oil reserves in the world and exports 10 million bpd, planned to add another 200 billion barrels of oil to its proven reserves figure.
He said this was “to reassure the world that we are not going to run out of oil in the next five to 10 years as peak-oil theorists say.”
Exploration efforts to find new oil fields that could be exploited in the future will also continue.
“Saudi Arabia is not fully explored,” he said.