Saudi oil minister speech to CERA conference

Saudi Arabia’s oil minister, Ali al-Naimi, on Tuesday gave a keynote address to the CERAWeek energy conference titled “Achieving Energy Stability in Uncertain Times.”

Excerpts of Naimi’s remarks are below.
“Ladies and gentlemen, 2008 was a year of unprecedented turmoil and volatility, the likes of which have not been seen since the Great Depression of the 1930s. A year ago, we were riding the crest of a wave of rising commodity prices, asset values and wealth creation that appeared unstoppable. Today, as we ponder the horrific consequences and the terrible swiftness and scope of the collapse, we know now that what we saw then was not unstoppable, but rather unsustainable.”

“The high level of volatility that now characterizes oil markets represents a significant impediment to ensuring adequate and timely investment flows into the energy sector. …. If today’s low prices continue long enough, they will sow the seeds for future price spikes and volatility.”

“While the push for alternatives is important, we must also be mindful that efforts to rapidly promote alternatives could have a chilling effect on investment in the oil sector. Growing demand uncertainty increases producers’ perceptions of investment risk. A nightmare scenario would be created if alternative energy supplies fail to meet overly optimistic expectations, while traditional energy suppliers scale back investments due to expectations of declining demand for their product.”

“Saudi Arabia realizes that we have an important role to play in promoting stability in world oil markets. The most powerful tool we have for achieving a balanced market is our maintenance of spare production capacity. We work very hard to make sure that the global oil market is well supplied and well balanced, and to that end it is our ongoing policy to maintain at least 1.5 to 2 million barrels per day of spare capacity to be used when there is an unexpected need. Given current oil market conditions, our spare capacity will be 4.5 million barrels a day by mid-year when we bring the Khurais mega-project of 1.2 million barrels per day on stream, which is significantly higher than our stated policy.”

Reuters