SEOUL, 16 May 2008 — Petroleum and Mineral Resources Minister Ali Al-Naimi said yesterday that Asian oil consumption was projected to increase by 20 million barrels per day by 2030, accounting for 60 percent of growth in world demand.
“Some 80 percent of this increase in demand will be met by supplies from the Middle East,” Al-Naimi said while delivering a speech at Seoul National University, where he was awarded an honorary doctorate.
Al-Naimi said Saudi Arabia was carrying out investment projects, worth $90 billion, to boost oil and gas production capacity as well as refining facilities. “The short-term oil price gyrations seen in recent years are more closely tied to the internal logic of the financial markets than to underlying supply/demand fundamentals,” he said.
Consumer countries have called on the Organization of Petroleum Exporting Countries (OPEC) to ramp up production to help ease the sting of high fuel prices, but most members have resisted, saying that markets are well supplied and stocks ample.
US oil prices fell back below $124 a barrel yesterday after Iran reassured markets it would not cut exports. US data showed a rise in distillate inventories and the US dollar held firm, but prices remain near Tuesday’s record of near $127.
A lack of spare crude output capacity and tight refining capacity has helped fuel the six-year rally in oil prices, but Al-Naimi said the supply outlook remained bright. “The world economies today are more energy efficient than any time in history,” he said. “From the perspective of oil and gas resource endowment, the picture is different from what the resource pessimists paint.”
Proven global oil reserves have risen from 667 billion in 1980 to 1.2 trillion barrels now, even though the world has consumed some 700 billion barrels in the interim, he said.
The Saudi minister reiterated that financial markets, rather than fundamentals, were influencing current oil prices. “Financial markets have a logic and mechanism of their own. Such markets are influenced by ever-changing factors and parameters that transcend markets and boundaries and are often unregulated. Therefore, the short-term oil prices are more closely tied to the internal logic of the financial markets than to underlying supply and demand fundamentals.”
The rising cost of oil and gas production, refining, and other related infrastructure bottlenecks, as well as the “rush into costly alternatives such as bio-fuels in some countries” were also increasing the cost of the marginal barrel worldwide, he said.
He said Saudi Arabia would increase its sustainable production capacity to 12.5 million bpd by end-2009 through a succession of capacity increments.
The global economy expanded by 3.2 percent and emerging markets by 4.1 percent annually when oil prices averaged only $17/barrel, Al-Naimi said. At an average crude price of $30/barrel during 2000-2007, the global economy grew by 6.7 percent, he pointed out.
To meet its growing oil demand, Asia will need $150 billion investments in setting up new refineries and upgrading existing ones, the oil minister said.
The Seoul National University said it had decided to award Al-Naimi the doctorate because he had served to “promote world peace and common wealth by efficient redistribution of energy.” The minister had been instrumental in stabilizing South Korean oil imports from Saudi Arabia, it noted.
