Oil ministers, CEOs: Don't panic about oil prices
Wednesday, March 9, 2011; 5:30 PM
HOUSTON -- Energy leaders from around the world meeting in Houston this week have a consistent message about high oil prices: Don't panic.
Oil markets may have heard the message - prices fell Wednesday for a second straight day to near $104 per barrel. U.S. drivers, however, may not be so easily reassured.
Oil rose 24 percent in the past three weeks. In that same time, the average price of regular gasoline in the U.S. increased 40 cents per gallon to $3.52, the highest since September 2008. This is straining the wallets of drivers and raising fears among economists that high energy prices will stall the nation's economic recovery, lead to inflation, or both.
The price is near $4 per gallon in West Coast cities like San Francisco. Rex Tillerson, the chief executive of Exxon, acknowledged Wednesday while speaking to reporters in New York that $4 gasoline would strain the budgets of American families.
Oil prices are high primarily for two reasons, analysts say. They rose above $90 per barrel late last year as a result of rising global demand for oil, especially from China, India and other developing economies of Asia. More recently, fears that widespread unrest in the Middle East would significantly disrupt supplies pushed prices even higher.
Last year global oil demand grew at the second fastest rate in the last 30 years, said Jim Burkhard, Managing Director for Global Oil at research firm IHS Cambridge Energy Research Associates, or CERA, the host of the Houston conference. "The Middle East has added a dose of anxiety to the market," he said.
But oil ministers from the Middle East and executives of international oil companies gathered in Houston say there is plenty of oil flowing to meet worldwide demand, currently around 87 million barrels per day. That's even with the supply disruption caused by unrest in Libya, a member of OPEC.
"There is no shortage of oil in the market," said Youcef Yousfi, the Algerian Minister of Energy and Mines, in a meeting with reporters. The high price, he said, is a result of the "hardly predictable logic" of oil traders in the financial markets.
Those traders may be listening to another group with a consistent message: geopolitical analysts. They contend that the unrest in the Middle East, which has toppled governments in Tunisia and Egypt, is in its very early stages. That raises concerns about disruptions to supplies from Saudi Arabia, the world's biggest exporter of oil, and Iran, the second largest member of OPEC.
Ryan Crocker, a former U.S. Ambassador to Iraq, Pakistan, Syria, and Kuwait, said during a speech this morning: "What has happened in Egypt and Tunisia has been dramatic, but wait for the next 17 chapters."
CERA's Burkhard took the middle ground between the two groups.
"There are no gas lines and we are not running out of barrels of oil," he said. "But it's difficult to overestimate the importance of the Middle East to global oil markets."