"Oil and the World Economy"
Speech: Minister for Petroleum &Natural Gas, Govt. of India

Excellencies
Hon'ble Ministers
Distinguished Delegates  
Ladies & Gentlemen

It is my proud privilege to represent India in this august forum "London Energy Ministers Meeting". The timing of the meet could not have been better when all of us are together fighting one of the biggest economic meltdowns.

There was an unprecedented boom; then the collapse. Who imagined this? There were some indications and apprehensions which we discussed last time at Jeddah. However, the dizzy heights of the oil price curve restricted

In the recent past with sudden collapse of the crude prices, you would have realized that the speculators have been having a field day in causing extreme volatility in the prices. It is now evident that oil prices are being determined by the commodity exchanges. This is a dangerous sign and should have alerted all of us. Unfortunately it did not.

Stability is the first requirement for sustained economic development. Oil prices on a rollercoaster have created only uncertainty.

What we now need is to rediscover stable market with transparent regulations; the market where producers as well as consumers find equal respect.

Another important issue is reasonable oil price; neither too low to discourage investment; nor too high playing havoc with import dependent economies.

Sharp decrease in oil prices, as witnessed now at $40 per barrel, will adversely affect the economies of oil producers choking the supply lines.

At the same time, consumers burdened with high oil prices, like $147 per barrel in July 2008, will see their economies under tremendous strain.

Balancing of interests of producers and consumers can only evolve a healthy market.

Volatility of oil pnces was the key issue in the Jeddah meeting in June this year. We were concerned about "unpacking the uncertainties" in oil business. I believe the Jeddah resolves were remarkable. Cooperation, collaboration and supporting mutual confidence was the premise. Today - in this new economic order - it is more relevant than ever.

Related impacts like collapse of established institutions, bankruptcy of major investment banks, closure of companies, liquidity crunch, job cuts, etc., are extremely painful.

Oil industry is not an exception. Falling crude price has adversely affected revenue streams of producing nations and it may eventually lead to squeezing of investments for future projects which are under implementation or were conceptualized; particularly, oil and gas exploration In frontier and deep water regimes, arctic oil, etc. This is disturbing news.

I hope the present crisis won't lead us to another "Lost Decade" as witnessed in the late nineties when low crude oil prices restricted investment, capacity creation and recruitment.

Shortfall in capacity or capability build up will jeopardize future supplies and volatility in oil prices may rule again. The circle will fold in upon itself: 'uncertainty' to 'uncertainty', 'instability' to 'instability'.

Squeezing oil or energy demand IS a temporary phenomenon. Economic growth means higher demand for energy. Higher demand would require more efficient energy markets with focus on future. 

The energy leaders present here will have to address this first issue - maintaining momentum for capacity and capability build-up.

We very well addressed this issue in the Jeddah meet. To quote from Jeddah statement:

Quote:
Appropriate Increase In investment both in upstream and downstream is necessary to ensure that the markets are supplied in timely and adequate manner. Predictable energy and investment policies as well as better access to technology are necessary to this end.

Unquote:
Making oil business transparent is another important issue. In this regard, a lot of expectations are pinned up on upcoming report "Unpacking Uncertainty", which IEF Secretariat is preparing.

We will have to go beyond our compulsions to reach the realities and draw governing rules for a transparent oil market where expectations of producers and the consumers are addressed without third party interventions. We should collectively put in place appropriate regulatory mechanism to ensure that unhealthy speculative practices are restrained and absolute transparency is brought to crude oil market. To this end, I propose that this Forum may decide to set up an Expert Group to make suitable recommendations in this regard.

Stability in prices can be achieved provided the suppliers and buyers entwine their interests by entering long-term sale and purchase agreements not only for the purpose of supplies but also for prices at which such supplies are made. Spot sales should be confined to the minimum.

This august forum of 'Energy Leaders' has immense responsibility towards providing a structured solution for sustainable growth for the industry. The continued dialogue signifies commitment and that is reason we are here just after six months.

We will have to take our resolves still further to ensure that we are able to address global energy aspirations in sustainable manner.

Thank you.

"Oil and the World Economy"
Speech: Minister for Petroleum &Natural Gas, Govt. of India

Excellencies
Hon'ble Ministers
Distinguished Delegates  
Ladies & Gentlemen

It is my proud privilege to represent India in this august forum "London Energy Ministers Meeting". The timing of the meet could not have been better when all of us are together fighting one of the biggest economic meltdowns.

There was an unprecedented boom; then the collapse. Who imagined this? There were some indications and apprehensions which we discussed last time at Jeddah. However, the dizzy heights of the oil price curve restricted

In the recent past with sudden collapse of the crude prices, you would have realized that the speculators have been having a field day in causing extreme volatility in the prices. It is now evident that oil prices are being determined by the commodity exchanges. This is a dangerous sign and should have alerted all of us. Unfortunately it did not.

Stability is the first requirement for sustained economic development. Oil prices on a rollercoaster have created only uncertainty.

What we now need is to rediscover stable market with transparent regulations; the market where producers as well as consumers find equal respect.

Another important issue is reasonable oil price; neither too low to discourage investment; nor too high playing havoc with import dependent economies.

Sharp decrease in oil prices, as witnessed now at $40 per barrel, will adversely affect the economies of oil producers choking the supply lines.

At the same time, consumers burdened with high oil prices, like $147 per barrel in July 2008, will see their economies under tremendous strain.

Balancing of interests of producers and consumers can only evolve a healthy market.

Volatility of oil pnces was the key issue in the Jeddah meeting in June this year. We were concerned about "unpacking the uncertainties" in oil business. I believe the Jeddah resolves were remarkable. Cooperation, collaboration and supporting mutual confidence was the premise. Today - in this new economic order - it is more relevant than ever.

Related impacts like collapse of established institutions, bankruptcy of major investment banks, closure of companies, liquidity crunch, job cuts, etc., are extremely painful.

Oil industry is not an exception. Falling crude price has adversely affected revenue streams of producing nations and it may eventually lead to squeezing of investments for future projects which are under implementation or were conceptualized; particularly, oil and gas exploration In frontier and deep water regimes, arctic oil, etc. This is disturbing news.

I hope the present crisis won't lead us to another "Lost Decade" as witnessed in the late nineties when low crude oil prices restricted investment, capacity creation and recruitment.

Shortfall in capacity or capability build up will jeopardize future supplies and volatility in oil prices may rule again. The circle will fold in upon itself: 'uncertainty' to 'uncertainty', 'instability' to 'instability'.

Squeezing oil or energy demand IS a temporary phenomenon. Economic growth means higher demand for energy. Higher demand would require more efficient energy markets with focus on future. 

The energy leaders present here will have to address this first issue - maintaining momentum for capacity and capability build-up.

We very well addressed this issue in the Jeddah meet. To quote from Jeddah statement:

Quote:
Appropriate Increase In investment both in upstream and downstream is necessary to ensure that the markets are supplied in timely and adequate manner. Predictable energy and investment policies as well as better access to technology are necessary to this end.

Unquote:
Making oil business transparent is another important issue. In this regard, a lot of expectations are pinned up on upcoming report "Unpacking Uncertainty", which IEF Secretariat is preparing.

We will have to go beyond our compulsions to reach the realities and draw governing rules for a transparent oil market where expectations of producers and the consumers are addressed without third party interventions. We should collectively put in place appropriate regulatory mechanism to ensure that unhealthy speculative practices are restrained and absolute transparency is brought to crude oil market. To this end, I propose that this Forum may decide to set up an Expert Group to make suitable recommendations in this regard.

Stability in prices can be achieved provided the suppliers and buyers entwine their interests by entering long-term sale and purchase agreements not only for the purpose of supplies but also for prices at which such supplies are made. Spot sales should be confined to the minimum.

This august forum of 'Energy Leaders' has immense responsibility towards providing a structured solution for sustainable growth for the industry. The continued dialogue signifies commitment and that is reason we are here just after six months.

We will have to take our resolves still further to ensure that we are able to address global energy aspirations in sustainable manner.

Thank you.