Opec, EU plot to avoid new oil bubble
Regulatory reforms urged to curb last year's price spiral
June 24, 2009
By Reuters Vienna
Oil markets risked another speculative bubble unless the financial sector was reformed and transparency increased, but prices were not yet a threat to economic recovery, the EU and Opec said after joint talks in Vienna yesterday.
US oil was trading at about $68 (R555) a barrel yesterday, far below a record of nearly $150 hit last year and also below the $75 to $80 Opec officials said they were seeking.
"The 2008 bubble could be repeated if adequate regulatory reforms, including greater transparency, (are) not made as part of an overall reshaping of the global financial sector," the EU said after the talks.
It said the meeting had agreed the role of speculation in financial markets "had not been resolved". Opec has repeatedly blamed speculation for last year's run to record highs.
"Since the middle of 2008, we have been alerting the world … that there is a bubble. We need to have some kind of regulation," Opec secretary-general Abdullah al-Badri said after yesterday's talks.
Opec's leading producer, Saudi Arabia, said at the cartel's conference last month that oil prices of $75 a barrel could be achieved this year and the economy was ready to cope.
Members of the group have since nudged their price hopes even higher and Angolan Oil Minister Jose Botelho de Vasconcelo, the current Opec president, said yesterday he "would love to reach $80 a barrel".
For the fragile world economy, $80 could be alarming, but EU energy commissioner Andris Piebalgs said a price approaching $70 a barrel was not damaging.
"What we also discussed in our meeting is that $70 a barrel, the current price, definitely does not impede the recovery of the economy," he said.
"We really believe the current situation has some good stability. If it continues it will be a chance for (economic) recovery and also guarantee that upstream investments will continue," he added.
Opec has often argued that too low an oil price choked off investment in new supplies and yesterday's joint statement said any inability to invest in new production capacity "could lead to a perpetuation of damaging boom/bust cycles".
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