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Item of Interest
June 27, 2008

 

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Jeddah Energy Meeting:
The American Perspective

 

Editor's Note:

Government leaders and energy industry representatives met earlier this week in Jeddah at the invitation of Saudi Arabian King Abdullah to address the challenge of soaring global energy costs. U.S. Energy Secretary Samuel Bodman was among the officials who addressed the Jeddah Energy Meeting and SUSRIS provides his remarks to the conference and his concluding statement here for your consideration. We suggest you check the expanded SUSRIS Special Section on the Energy Crisis which provides a compilations of SUSRIS articles, related news reports and photographs from the Jeddah conference and about the troubled global energy markets.

 

 

Jeddah Energy Meeting
U.S. Energy Secretary Samuel Bodman Remarks 
June 22, 2008

Jeddah Energy Meeting 
Remarks as Prepared for Secretary Bodman 

Thank you, Minister Naimi.. ..and my sincere thanks to King Abdullah and the Saudi government for hosting this event.

Everyday -- and around the world -- we are seeing the significant negative effects that high energy prices have on our economies, our industries and, most profoundly, on our citizens. We face an extraordinary set of circumstances that demands responsible action from producing and consuming nations alike.

U.S. Energy Secretary Bodman tours a Saudi Aramco facility in Shaybah, Saudi Arabia in November 2005. (Photo: DOE)Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing � and increasingly volatile � prices.

Since 2003 global demand, fed by worldwide economic growth, has increased significantly.

World oil consumption growth has averaged 1.8 percent per year, with the largest share of that increase coming from non-OECD countries, especially China, India, and in the Middle East.

But for the past three years global oil production has remained constant at roughly 85 million barrels per day. OPEC production has remained largely flat while non-OPEC supply growth has been well below levels seen just four years ago.

As a result and even despite higher global production so far this year, inventories have been drawn down and current world surplus production capacity is well below historic levels � at fewer than 2 million barrels per day � and is highly concentrated in a few countries.

Our two main cushions against price volatility � spare capacity and inventories � have been severely strained. Not surprisingly, prices have responded dramatically.

If there are no additional supplies of oil, for every 1 percent increase in demand, we would expect a 20 percent increase in price to balance the market.

In my judgment, this reality of fundamentally tight market conditions is the major driver of the dramatic price increases we have seen over the past five years, and particularly in recent months.

Let me also say that I recognize the complexity of global markets and the interdependence of a number of contributing factors, which though not directly responsible for the upward trajectory of prices, are having an impact at the margins.

It is clear that financial markets have seen unprecedented movement of capital into commodities in recent years. This capital is following the oil market upward � not leading that movement.

The fact is, there is plenty � indeed, too much � uncertainty in the market, and those differences are represented by the differing views in this room. But I believe that most of us agree on one thing: prices are too high at present. And unless we act, the situation will remain unsustainable.

So we must come together with a clear intention to foster stable markets and reasonable prices, while restoring market confidence.

First, all nations must change the way we use energy.. ..and I put my own country, the United States, at the top of the list. We have a lot of work to do. Increasing the energy efficiency of our economies is an absolute necessity.

Secretary Bodman in Shaybah, Saudi Arabia during a tour of Saudi Aramco facilities. (Photo: DOE)Second, all nations � including producers, as Saudi Arabia has acknowledged � must move rapidly towards a more diverse, sustainable set of energy resources. This move depends on the aggressive development and deployment of cleaner and more sustainable energy sources and alternative fuels.

The U.S. government is funding programs � for both basic science and applied research and development � to achieve the type of transformational discoveries we need, and we are eager to work with the global community � especially in the developing world � to get these technologies deployed as quickly as possible.

At the same time, investments in new capacity in all liquid fuels � both from traditional hydrocarbon resources and advanced biofuels � are essential to assure long-term supply adequacy, and will have the added benefit of reassuring current market participants that supplies will be forthcoming.

While increases in near-term oil production are welcome and necessary, fundamentally the market needs to see investments in increasing long-term production capability and spare capacity. To some degree this is already happening � and I hope it continues.

To that end, this past week President Bush called upon the U.S. Congress to open access to currently restricted reserves in the Outer Continental Shelf, the Arctic National Wildlife Refuge in Alaska and our domestic oil shale resources.

Similarly, we must invest in more � and the right mix of � refining capacity around the world.. ..and the President has called for expediting the permitting of refineries in the United States.

But in order for the necessary global investment to occur, the world absolutely requires open, transparent investment climates, and predictable legal and regulatory environments � in producing and consuming countries alike.

We must have reliable, accurate, and timely market data. Good data � on consumption, inventory levels, and current and future surplus capacity levels � fosters efficiently functioning markets and will assist in reducing uncertainty.

One way we can do this is through the Joint Oil Data Initiative (or JODI). It is incumbent on all member nations and organizations to fully participate and report all pertinent information � now and on a sustained basis going forward.

We also must curtail the artificial manipulation of prices in order to promote more realistic energy consumption. And this means reducing untargeted subsidies.

Now, let�s be practical here. I�m not arguing for eliminating price subsidies tomorrow.. ..nor do I expect that is feasible or particularly wise. But I do believe that countries that employ this mechanism have a responsibility to take steps to reduce its use in a reasonable and timely way. And I believe that could have a meaningful impact on prices.

The true measure of our collective leadership will be our ability to resist the convenient � and all too easy � distractions of finger-pointing and laying blame.. ..and instead to take direct, meaningful actions that will materially improve this earth�s energy security.

This is a global challenge requiring a global solution. I believe we all are up to that challenge.. ..and our citizens expect no less from us.

Thank you.

Source: U.S. Department of Energy

 

Statement by U.S. Secretary of Energy Samuel W. Bodman at the conclusion of the Jeddah Energy Meeting in Saudi Arabia
June 22, 2008

JEDDAH, SAUDI ARABIA � At the conclusion of the Jeddah Energy Meeting in Saudi Arabia, U.S. Secretary of Energy Samuel W. Bodman issued the following statement: 

�I want to thank King Abdullah and the Saudi Arabian government for hosting a meeting that gave producing and consuming nations a chance to discuss the current state of the global oil market.

Everyday�and around the world�we are seeing the significant negative effects that high oil prices are having on our economies, our industries and, most profoundly, on our citizens. These trying circumstances demand responsible action from both producing and consuming nations. Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing�and volatile�prices. While this problem does not lend itself to quick fixes, I believe there are responsible actions that all nations can and must take to reduce demand and promote the substantial investment in all forms of energy development. While increases in near-term oil production like the one Saudi Arabia offered today are welcome and necessary, fundamentally the market needs to see investments in increased long-term production capability and spare capacity. I am pleased that today we agreed on this point. We also agreed on the importance of improving market functions through better data transparency. Additionally, we recognized the need to promote energy efficiency through the sharing of best practices and the reduction of market distorting mechanisms.

In the United States, we are taking steps to create diverse sources of supply by aggressively developing and deploying cleaner and more sustainable energy sources and alternative fuels. President Bush has also called on our U.S. Congress to allow access to our own significant domestic reserves which are currently off-limits to producers.

My hope is that the outcomes from the Jeddah Energy Meeting will help foster stable markets and reasonable prices, while restoring market confidence.�

Source: U.S. Department of Energy

 

Related Items:

U.S.-Saudi Relations and Global Energy Security Conference (2004)
 

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