Last week, the sheikh told a conference organised by the Centre for Global Energy Studies, which he chairs, that economic growth in the Third World would boost oil demand by 6.8 million to 11.4 million barrels per day by 2000, depending on whether or not a fuel tax was imposed. Because production elsewhere is expected to fall, Opec members will have to increase output by more than this: they have 77 per cent of proven world reserves.
But Sheikh Yamani warned that current low oil prices meant producer governments had little incentive to install the extra capacity needed. He quoted a new CGES study, which shows that even without the proposed taxes, investment in new capacity is marginally viable, and that with them, investment 'is hardly worth the effort'.
This would put governments in an invidious position, he said: 'If they were to use all their oil funds on the expansion of theircapacity they would have nothing to spend on the rest of their economies. But if they choose not to expand, there is the likelihood of a serious price spike some time from the middle of the decade. That would be profoundly destabilising.'
The sheikh was backed up by Dr Subroto, secretary-general of Opec, who claimed that the taxes, which are designed to reduce consumption for environmental reasons, could well persuade countries to shelve expansion plans. 'If demand is to be deliberately suppressed, then producers could not be blamed if they decided to reassess their policies,' he said.
The message from Opec contained a veiled threat. Dr Subroto and others said that they wanted co-operation between producers and consumers to continue, but that the imposition of taxes could bring back an era of confrontation.Reuse content