G8 hears oil prices could again soar when crisis eases

26th May 2009, Comments 0 comments

Meeting in Rome along with representatives from 15 other emerging and oil-producing countries, ministers from the Group of Eight industrialised nations addressed decreased investment in oil projects due to the crisis.

Rome -- Energy ministers from G8 countries on Sunday heard that oil prices could again soar when the global economic crisis eases and demand returns, requiring new investment to head off the possibility.

Meeting in Rome along with representatives from 15 other emerging and oil-producing countries, ministers from the Group of Eight industrialised nations addressed decreased investment in oil projects due to the crisis.

"Investments in new energy projects and new technologies are today postponed or cancelled because of uncertainties weighing on financial markets and the reduction in demand," Italy's economic development ministry said ahead of the meeting.

"When the crisis is over, the risk of insufficient energy supply exists, and as a result high and unstable prices."

Italian Economic Development Minister Claudio Scajola called for an alliance between the private sector and governments to spur investment.

Italy, which currently holds the G8's rotating presidency, hosted the two-day meeting that began Sunday in the run-up to the annual summit of G8 leaders in July.

The economic crisis has seen oil demand plummet and prices along with it, falling from a record 147.50 dollars per barrel in July to 32.40 in December. It has since risen gradually above the 60-dollar-per-barrel mark.

Electricity demand is expected to diminish by 3.5 percent this year "for the first time since World War II," said International Energy Agency (IEA) executive director Nobuo Tanaka.

Investment in oil-linked projects has also been hit, with an IEA report presented in Rome predicting a 21 percent drop in oil and gas exploration and production compared to 2008.

"There is some concern when the demand comes back we may have a supply crunch at mid-term," said Tanaka. "Investment in the upstream is very, very important to avoid this crunch."

Addressing the ministers on Sunday, the head of the Italian energy group Eni called for stabilising oil prices, pinning a "reasonable" price between 60 and 70 dollars per barrel.

"The persistence of high uncertainties related to oil price up to 150 dollars per barrel or down to 30 dollars might upset the entire energy system, blocking investments both in traditional and in alternative sources" including nuclear and renewables, said Roberto Poli.

IEA numbers also suggest the economic crisis has taken a toll on efforts to combat climate change, with investment in renewable energy expected to tumble 38 percent this year.

That is precisely the opposite of what is needed, according to the IEA, whose report says renewable energy investments must be multiplied by six and energy efficiency spending quadrupled in the face of climate change.

G8 countries, the European Union and emerging nations including China, Brazil, South Korea and Mexico signed a deal on Sunday that aims to boost cooperation on energy efficiency.

The International Partnership for Energy Efficiency Cooperation was launched in 2008 under Japan's G8 presidency.

Italian Economic Development Minister Claudio Scajola said governments must make progress on CO2 storage and capture systems and the safe use of nuclear power.

"This G8 confirms the idea that energy is also climate," French Energy Minister Jean-Louis Borloo told AFP. "Two or three years ago, an energy ministers meeting only discussed variations in the price of oil."

The G8 includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

The 23 countries invited to the meeting, including the 15 emerging and oil-producing nations, account for 80 percent of energy supply and demand worldwide.

Ministers were also to debate a plan to provide electricity to rural zones in Africa before wrapping up the meeting on Monday.

AFP/Expatica

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