Fair oil price would be twice as high, Opec says

A "fair price" for oil is between $60 and $80 a barrel, the secretary general of Opec, Abdullah al-Badri, told participants at the World Economic Forum yesterday, up to twice as high as the current price in the market.

Mr Badri warned he believed that the current price of oil, around the $40 mark, was insufficient to provide an acceptable income for Opec member states, or high enough to fund the investment needed to raise capacity in time for the next economic upswing.

The price of a barrel of oil has fallen from a peak of almost $150 last summer to below $40 in recent weeks as demand for oil has fallen sharply in line with the global economic downturn. The oil producers' group, said Mr Badri, was prepared to act to reduce supply further if necessary; having decided to cut output in September and October, Opec oil production will be 4.2 million barrels a day lower by the end of this month, and further cuts in supply would act as an inflationary pressure on the market price.

The cartel, whi ch accounts for roughly 35 per cent of world oil production and two-thirds of proven reserves, is next due to meet formally in March in Vienna, Austria. Mr Badri said that if Opec was still suffering from what he described as a "destruction of demand" in March, then members of the group "will not hesitate to take oil out of the market".

He said he was "not very happy" with oil at $40 "or even $50" per barrel. "Even with $50 we cannot have a decent income for our members," Mr Badri added.

However, while Opec member states have been warning for some months that the current market conditions cannot continue indefinitely, higher oil prices would be a blow to much of the world. As the global economy enters what the International Monetary Fund said on Wednesday would be the worst recession since the Second World War, cheaper oil is one of the few bright spots. Any push by Opec for higher prices through restricting supply will suck even more spending power out of the advanced and emerging economies, and may hit developing nations especially hard.

Nevertheless, the Opec secretary general's declaration of a "reasonable price range" was endorsed yesterday by BP's chief executive, Tony Hayward, who estimated that a price of between $60 to $80 a barrel was needed to ensure adequate investment to meet growing oil demand by Opec countries. Mr Hayward also said that only this level of price would meet the cost of producing the marginal 3 million to 5 million barrels a day of world supply from sources such as ultra-deep water wells, Angola, Brazil and Canada's oil sands.

The BP boss said, however, that price levels higher than $100 tended to adversely affect consumer behaviour.

Pierre Gadonneix, chairman and chief executive of Electricité de France (EDF), also agreed that $60 to $80 would be compatible with a competitive nuclear power sector, which he favoured.

Indeed the "spirit of Davos" seemed to overwhelm all the energy session panel members in their rush to agree with the $60 to $80 proposal: other panel members, including Mukesh Ambani, chairman of the Indian giant Reliance Industries, which has interests in natural gas, and the President of oil-producing Azerbaijan, Ilham Aliyev, were also happy to back the Opec line.

Mr Badri repeated the Opec claim that the spike in the price of oil to an all-time high of $147 last year was artificially created by speculative traders rather than genuinely reflecting demand and supply. He also hinted at the idea that the world's major oil producers and consumers should agree the oil price and make oil a much less traded commodity.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living