Energy ministers from across the world claimed a victory over oil price volatility yesterday by agreeing on the need for better regulation of the global market – but the widely different agendas of producing and consuming nations make co-operation difficult.
Delegates at the heavyweight London Energy Meeting – including the UK Prime Minister, the Saudi Oil minister, and the President of the Organisation of Petroleum Exporting Countries (Opec) – met in an effort to combat unpredictable peaks and troughs that hurt consumers and producers alike. The session concluded with an agreement that the International Energy Forum will collect and publish data on annual energy investment plans for the first time, and with plans to create a group to ensure an ongoing dialogue.
The meeting was convened to calm the volatility that has seen crude prices shoot to $147 and crash back under $40 in fewer than 12 months.
Although today's lower prices may be a welcome breather for stuttering economies, ongoing unpredictability threatens long-term investment, Gordon Brown said. "The risk now is that investment in oil and other energy sources will once again stagnate, supply capacity will begin to tighten just as demand responds to improved economic conditions."
A global energy market needs a similarly global policy to overcome what Mr Brown calls "the traditionally adversarial relations between producers and consumers". That means improved information, available worldwide, on everything from demand to supply to investment programmes to financial markets. It also means a rethink of the regulations governing commodity futures trading, to avoid speculation-fuelled bubbles. The International Organisation of Securities Commissions task force, which was set up to look at the existing rules and is chaired by the UK, will bring forward proposals in the spring, the Prime Minister said.
Ali al-Naimi, the Saudi Oil minister, echoed the need for producers and consumers to work together. But the holder of the world's biggest reserves is more up-front about what the kingdom sees as a fair price. "The referenced $75-per-barrel price target for oil meets all the stability and predictability criteria, and creates the kind of investment climate conducive to research and development," Mr al-Naimi said.
Saudi Arabia is sticking to its investment plans, and will expand output from just over 11 million barrels per day now to 12.5 million in 2009 as expected. But elsewhere in the world, projects are being pulled and investments deferred.
According to Cambridge Energy Research Associates, this year's sky-high prices took $150bn (£100bn) out of global economic output, while under investment in future supply, as a result of the current dip, could cut global GDP by $1.5 trillion in two decades time, says Oxford Economics.
Noe van Hulst, secretary general of the International Energy Forum, which collates global oil data, said: "The more we know and the better the market players are informed, the less room there is for unfounded speculation."
The problem is that, beneath the veneer of a shared interest in stability, it is hard to reach agreement. Ed Miliband, the UK Energy Secretary, refused to speculate on the ideal oil price yesterday, but endorsed current lower levels as good news for recession-hit economies.
Meanwhile, in a veiled attack on recently raised UK petrol duties, the Saudi minister described the drop in energy prices as "an injection of liquidity into consumers' pockets", and criticised attempts to tax it away again.
As the Opec president, Chakib Khelil, said: "From the producers' point of view, we know we can never achieve agreement on price with the consumers."