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Global Oil Panel Urges Cooperation

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The Associated Press

Published: July 1, 2008

MADRID, Spain - MADRID, Spain - As oil set a new record, top industry executives and a senior EU official Monday urged the world to pull together in the face of skyrocketing energy prices, while acknowledging that - even if it does - costly crude is here to stay for years.

The comments to the World Petroleum Congress by EU Energy Commissioner Andris Piebalgs and the heads of Shell, BP and Spanish Repsol reflected a key theme of the four-day meeting: how to bring order into volatile and ever pricier oil and related energy markets.

Underlining their concerns, oil rose to a record high above $143 a barrel Monday, as expectations of a weaker dollar spurred investors to buy dollar-denominated oil futures as a hedge. Although light sweet crude for August delivery closed at $140, it rose earlier in electronic trading to a new high of $143.67.

Oil's new peak underscored the somber tone of the conference's opening session. Although speakers expressed hope that prices will stabilize after more than tripling during the past three years, they agreed that they are unlikely to return to their 2005 levels.

"We need a global effort to improve our resilience," Piebalgs told delegates packing a cavernous plenary hall, while acknowledging that "there is no silver bullet" to lower prices, ease concerns about supply and reduce speculative investments propelling markets upward.

"If the EU with 27 countries ... could agree on common energy policies, I believe we can do it in the global forum," he said.

British Petrol Chief Executive Officer Tony Hayward warned against hopes that present high prices are a bubble that will burst the same way that they did in the 1970s, saying the supply and demand picture had changed since them.

"The era of cheap energy is probably over, at least for the medium term," he said.

"The last time oil prices surged to this level, new production from the North Sea and Alaska helped bring prices down," but now there are no new sources of "easy oil" to compensate, he said. Instead, said Hayward, OPEC production fell by 350,000 barrels a day last year - although demand has grown for five consecutive years - and in Russia, "production has started to decline."

While agreeing with Hayward that there was enough crude in the ground, Shell chief Jeroen van der Veer acknowledged it was time to focus more on "difficult oil" - unconventional methods of recovery that are costlier and more complicated than the normal drilling process - to meet growing demand.

"There is hardly any additional access to easy oil," he said. "Most of the new supplies will be difficult oil."

Producers and refiners in the Spanish capital will be struggling to find answers not only on how to ensure stable supply, but also on doing it in a way that minimizes emissions of the greenhouse gases believed to cause global warming.

Still, with oil bouncing from high to higher, the primary concern at the meeting was over availability and prices.

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