Gordon Brown delivered a stark warning today that failure to tackle volatility in oil prices could cost the global economy trillions of dollars.
The Prime Minister said wild variation in prices was the "most pressing challenge" the international community faced.
The problem hits producing countries as well as consuming ones because demand for oil falls when economies slow down, he said. The unpredictability of income made it difficult for producers to plan and invest effectively in infrastructure.
Opening an international oil summit in London today, the PM pointed out that over the past 12 months oil prices had rocketed from 60 to 147 per barrel, before plummeting to around 40.
Research showed those changes had cost the global economy some 150 billion over that period, he said.
"Wild fluctuations in market prices harm nations all round the world," Mr Brown insisted. "They damage consumers and producers alike."
The premier went on: "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 improving economic conditions."
Such failure to invest could cost the world economy an estimated 1.3 trillion a year by 2030, Mr Brown warned.
Despite the recent oil price falls, Mr Brown highlighted the danger that they would rise again once the economy recovered.
He called for "transparency" in prices and a "new partnership" between producer and consumer.
The "visionary internationalism" that had been displayed in connection with the global banking crisis must be applied to energy challenges, he insisted.
He said it would be a "huge mistake to fall back on the old ways of the past".
"Even as we move to a low carbon economy the world will continue to need large (amounts of) oil for the foreseeable future," he insisted.
"This in turn will mean that oil producers particularly those with the lowest crossed reserves will continue to need to invest in capacity.
"But at the same time volatile prices make that investment less certain, sowing the seeds for continued volatility in the future."
Mr Brown stressed that, far from being contradictory, working to establish stable oil prices was a key part of tackling climate change.
Ali Al-Naimi, minister of petroleum and mineral resources in Saudi Arabia, the country that holds the world's largest oil reserves, followed Mr Brown's speech with a caution against excessive oil taxation.
Mr Al-Naimi warned high taxes on oil would be detrimental to the consumer in a time of global economic difficulty.
The minister said: "The consumer's price is very high in many developed economies, where it is in excess of 80 dollars per barrel above market prices because of taxes.
"Excessive taxation creates a drag on consumer spending and in turn hampers economic growth.
"This is particularly important today, when consumers should not be burdened with taxes at a time when economic growth and the end of recession hinge on higher consumer spending.
"The drop in energy prices from their peaks in July is essentially an injection of liquidity into the consumers' pockets. Some economists calculate this injection to be in the trillions of dollars.
"Raising taxes today will withdraw this badly needed liquidity and further hamper today's fragile economic conditions."
The Saudi minister said the delegates would be "surprised" to hear that his country had serious plans to invest in all energy sources, not exclusively in oil.
He said: "Speaking of innovation, you may expect to hear dismissive remarks about alternatives from me, the minister of petroleum and mineral resources of the country that holds the world's largest proven conventional oil reserves and the fourth-largest gas reserves, with the potential to add much more.
"You may then be surprised to hear me say that Saudi Arabia sees a role for all viable energy sources to meet global needs."
The minister said his country's national oil company Saudi Aramco and the King Abdullah University for Science and Technology (KAUST) had both invested in solar power technology.
He went on: "I believe there will come a day when Saudi Arabia supplements oil with solar power and we will then export energy in gigawatts as well as barrels."
He added: "I hope you believe me."
But the minister warned that countries must remain "realistic" about the contribution made by fossil fuels.
"Yes, we do need to develop alternative and renewable energy resources," he said.
"But we must also be realistic about their ability to contribute significantly to the world's energy mix at this time and in the foreseeable future.
"Right now, significant hurdles - technical, commercial, environmental and economic - must be overcome before many of these options are feasible or operationally viable."
He added: "We must support alternative supplies, because they are the future. But for the present, the immediate future and for several decades to come, fossil fuels will continue to keep our economic and societal wheels turning."
Addressing a press conference later in the day, Minister for Energy and Climate Change Ed Miliband responded to Mr Naimi's warning against excessive taxation.
He said: "If you lower tax in that area you're going to have to find more money elsewhere either through public spending, more borrowing or taxes somewhere else.
"The point I would make is that whatever the levels of taxation as a contribution to the price at the pump here, there's no question that the dramatic fall we've seen in oil prices has led to a significant lowering of the price at the pump and I think it's a good thing.
"I also think it's important those price falls are passed on in falls in retail prices of energy.
"It's important the energy companies pass on their price cuts that we've seen in the wholesale market as soon as they possibly can."
He added: "We've seen extra relief for consumers in the UK from what's happened in the oil market, we've also cut VAT in this country which is a way of putting more into people's pockets.
"There are a range of measures we're taking in the country, but there's no question that what we've seen in the oil market has been of help to the UK consumer."
Dozens of energy and oil ministers from across the world attended today's London Energy Meeting to resume discussions first opened during an emergency conference convened in June 2008 in Jeddah, Saudi Arabia, to discuss the unprecedented hike in oil prices.
Today, Mr Miliband said stable oil prices could not be guaranteed, but Governments would do all they could to prevent a spike in oil prices, as seen earlier this year, from recurring.
He said: "Because of the global recession, we've been given a space in which to think through how we avoid the kind of price spike that we saw earlier this year happening again. And that's the point of this process.
"Jeddah was convened, let's be honest about it, in more urgent circumstances as far as consuming countries were concerned, because prices were up to 147 dollars a barrel and therefore the situation is in a sense less urgent but it's no less important.
"We've got to use the opportunity we have at this process, at this Jeddah and London process, to find ways to do all we can - we can't have a 100 per cent guarantee of course - but do all we can to prevent the kind of price spike and prevent the kind of volatility we've seen. That's what we've got to work on."
Opec Secretary-General Abdullah al-Badri accused Mr Brown of being "confused" over oil prices, and insisted he should cut duty if he was worried about prices.
"I think Mr Brown is very confused, because if he is looking for the interests of his people he should look at the taxes," Mr al-Badri told BBC Radio 4's World at One.
"He is getting the highest taxes in Europe, maybe the world.
"So Mr Brown, instead of looking at Opec, he should look at his policies and try to reduce taxes and then he can talk to us."Reuse content