Minister of Petroleum and Mineral Resources Ali Ibrahim Al-Naimi, addressing the sixth world energy conference yesterday in Capetown, South Africa, underscored the importance of stabilizing the global oil market and thereby bolstering the world's economy. He noted that over the past ten years there has been a seventy percent increase in the demand for oil by the developing countries, a rate of increase equal to that of their economic growth. Pointing out that the recent economic crises in certain developing countries would not continue, he declared that in due course there would be renewed demand from them. The situation is slightly different in industrial countries. The rate of consumption has remained high over the past two decades, and still constitutes 62 percent of the total world demand.
Minister Al-Naimi therefore predicted a boom in the petroleum market in the next decade due to increased demand for oil by both developing and developed countries. He pointed out that the traditional oil producers in the Middle East and Latin America hold about 70 percent of the total world reserves, and that in spite of the fact that there are over eighty oil-producing countries in the world, OPEC member states, together with a few non-OPEC countries, manage about 85 percent of all oil exports.
He went on to say that if the cost of petroleum remains at a reasonable level that preserves sufficient margins for the producers, then the world will witness an economic boom, but if the oil prices drop suddenly, the consequences for all will be bad. He noted that in the event of a sudden drop in oil prices, oil production will also drop in the long run, and investors will go looking for new and better areas of investment. Low oil prices might lead to a temporary increase in demand, but that would be without the economic incentive that helps preserve production. In consequence, oil producers would not be able to hold out, and in the long run oil consumers would not benefit from these low prices. Oil prices, he said, should reflect the true value of petroleum, adding that oil exploration and production are cost-intensive.
Minister Al-Naimi made it clear that OPEC member states can only realize stability in the world oil market with the cooperation of the other oil producers, and that of the oil consumers. Petroleum, he said, is a matter of vital importance to the world economy as well as to the countries that produce it.