Union minister of petroleum and natural gas Murli Deora on Friday urged oil producers and consumers to enter into long-term supply agreements at fixed prices.
Union minister of petroleum and natural gas Murli Deora on Friday urged oil producers and consumers to enter into long-term supply agreements at fixed prices in order to achieve stability in global crude oil prices.
At a seminar organised by Organisation of Petroleum Exporting Countries (Opec) at Vienna in Austria, Deora said stability in oil prices could be achieved only by balancing the interests of both producers and consumers. “This is essential for sustained economic development,” he added.
The high volatility and uncertainty in crude oil prices is neither in the interest of produces nor of consumers, Deora said, adding that the situation was particularly difficult for emerging economies such as India, which are heavily dependent on crude oil imports. India depends on imports to meet almost 75% of its energy requirements.
"We have painfully noticed that high oil prices were not dictated by the simple dynamics of demand and supply, but were fuelled by unhealthy speculative practices,” he said.
Global crude oil prices rose to an all-time high of $147.27 per barrel on July 11 last year and crashed by almost three-quarters to below $40 per barrel in just six months. Currently, crude oil is trading higher at $51.65 per barrel, boosted by speculation that the US Federal Reserve’s spending plans would fuel growth.
Deora said the current global economic crisis, coupled with the low crude oil prices, have resulted in reduced investments in the sector, thus risking future supplies. “We find a common worry in the slackening pace of investment in the oil sector as today’s delays will provoke a wide disparity in demand and supplies of tomorrow, when the world is out of recession,” Deora said. Deora added, “It is important the industry focus on supply augmentation and avoid taking a short-sighted view.” He said it was necessary for the industry to keep its momentum and invest in future capacity build-up.
The minister noted that with the help of technology, the industry has been able to successfully explore oil and gas in areas that were earlier thought to be inaccessible and challenging such as frontier basins, deepwater and ultra-deepwater zones.
“The industry, however, will have to look for such technologies that make supply from these challenging locations cost effective,” he added.
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