Consumers at fault for high prices says BP
Posted by mhudema on July 1, 2008
|Canwest News Service|
MADRID – Much-maligned speculators aren’t to blame for soaring oil prices, the head of Anglo oil giant BP PLC said Monday.
Rather, it’s consumers who have pushed demand for energy to new heights that are the cause of runaway crude prices, Tony Hayward told the inaugural session of the 19th World Petroleum Congress.
The rookie CEO of the world’s second-largest oil company said sky-high crude prices are “completely based on fundamentals,” and characterized speculators as “investors” rather than profiteers.
“Some people put the rises down to short-term factors – so-called speculators, or the weakness of the dollar. But the reality is that this is about fundamentals: a very tight balance between supply and demand,” Hayward said. “At least for the medium term, the era of cheap energy is over. . . . This is not a speculative bubble.”
Hayward said it is a “myth” to blame speculators for oil prices that have doubled in less than a year.
Demand has outstripped supply for at least the last five years, he said. Consequently, prices have risen in the longest uninterrupted stretch in more than a century.
Benchmark American crude prices hit a new intraday high of $143.67 a barrel in New York on Monday, before pulling back to the $140 range.
Hayward’s comments put him at odds with his contemporaries who continue to insist that the world is well supplied with oil and blame market distortions for high prices.
Spanish King Juan Carlos called for a “new model” and Repsol CEO Antonio Brufau said there is “clearly” a speculative component built into the oil price.
Shell CEO Jeroen Van der Veer countered with the “myth” that the world is not running out of oil. Rather, he said it would take “more brains per barrel” to extract unconventional sources such as Canada’s oilsands, where the company is spending billions to increase output.
Although Canada represents less than three per cent of the world’s production, it has the second-largest reserves outside the Middle East – the vast majority of it in northeastern Alberta. It is one of the few non-OPEC countries that is increasing output and it is one of the few countries in the world that doesn’t limit foreign investment in upstream production.
Repsol’s Brufau complained that 90 per cent of the world’s oil reserves are located in countries that limit access to international oil companies, making it difficult for countries such as Spain to get access to the oil it needs.
According to the U.S. government’s Energy Information Agency, Spain produces less than 3,000 barrels per day of the 1.5 million barrels it consumes, making it one of the most dependent countries on the world market.
Despite its relatively small contribution to global supplies, Canadian Association of Petroleum Producers’ vice-president Greg Stringham agreed that Canada is becoming the world’s swing producer.
With oilsands production expected to double by 2020, Canada will assume a growing role on the world market, especially with its heavy, hard-to-produce product.
“The demand is certainly there for all the oils,” he said from Calgary. “The whole world slate is getting heavier. It (oilsands) is the marginal barrel right now, one of the few places on the growing edge of supply. . . . It may be small, but it’s significant and will become more important as time goes by.”