KING Abdullah of Saudi Arabia, whose nation is the world’s number one oil exporter, called on consumer countries to get used to high prices in comments published on Tuesday.
‘Consumer countries have to adapt to the prices and the mechanisms of the market,’ the king said.
He added: ‘We have nothing to do with the current sharp increase in crude prices,’ reiterating the Saudi position that speculation, rising demand and the taxation of oil products in consumer countries were to blame.
‘These countries must reduce their taxes on fuel if they want to contribute to easing the burden on ordinary consumers,’ he said.
Last month Saudi Arabia hosted a one-day conference between consumers and producers but the meeting failed to dampen the red-hot market.
Oil prices jumped beyond 142 dollars a barrel on Tuesday after OPEC president Chakib Khelil said there was uncertainty surrounding future investment in facilities to boost crude output.
‘The concern we have is about the security of demand,’ Khelil, who is also Algeria’s energy minister, told an energy conference in Madrid.
And there are ‘big uncertainties’ about making huge investments in infrastructure to increase output from members of the Organization of Petroleum Exporting Countries, which pump about 40% of world oil.
Meanwhile the International Energy Agency (IEA) said growth in supply would outpace demand until 2010, after which the market would likely experience supply tensions.
An IEA report published on Tuesday also disagreed with the Saudi view that speculation was behind skyrocketing prices.
‘Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis or perhaps confront difficult decisions,’ the IEA said.
‘Blaming speculation is an easy solution which avoids taking the necessary steps to improve supply-side access and investment or to implement measures to improve energy efficiency.’
But the Saudi king insisted that speculators were to blame.
‘Anyone who pretends that a production increase will ease speculation is mistaken, speculators believe that prices will remain high,’ he said.
He also defended Saudi pricing policies saying ‘we propose our products on the international markets according to current prices, be they low or high.’
King Abdullah also expected ‘oil demand to increase in the future in response to to economic growth levels’ across the world, adding however that the Gulf has ‘enough oil resources to satisfy demand.’
Meanwhile, speculation that Israel plans to attack Iran’s nuclear facilities raise fears regarding oil supply.
The oil price rose by nearly $3 on Tuesday after tension between Israel and Iran raised fears about a possible oil supply crisis.
US crude rose $2.90 to $142.90 a barrel by 2.00 pm. London Brent crude rose $3.10 to $142.93.
On Monday, US crude hit an all-time high of $143.67 a barrel, but later eased, with traders citing evidence high prices were eroding demand, especially in the United States.
Speculation has mounted that Israel plans to attack Iran’s nuclear facilities, which Iran says are for purely peaceful purposes, following a big Israeli air force exercise last month.
Iran’s Revolutionary Guards said Iran would impose controls on shipping in the Strait of Hormuz if the country were attacked, a newspaper reported at the weekend.
Roughly 40% of the world’s traded oil moves through the narrow waterway separating Iran from the Arabian Peninsula.
‘The market has been worried about the tensions involving Iran and that remains a supportive factor for the oil price,’ said David Moore, a commodities analyst at the Commonwealth Bank of Australia in Sydney.
Oil prices have risen by more than 40% so far this year.
High oil prices have been eroding fuel demand especially in the United States, the world’s largest oil consumer.
The US government said on Monday domestic oil demand in April was the lowest for that month since 2002.
The next set of data from the US government, to be released on Wednesday, is expected to show a 200,000-barrel fall in overall crude stocks.
There has also been some controversy about the Gulf States’ Sovereign Funds, that leaders like the UK’s Gordon Brown are trying to get their hands on for inward investment.
Estimates placing the size of Abu Dhabi’s sovereign wealth fund at $800 billion are exaggerated, Sheikh Khalifa bin Zayed al-Nahayan, ruler of Abu Dhabi and President of the United Arab Emirates, was quoted as saying.
Speaking to Lebanon’s al-Nahar newspaper over the weekend, Sheikh Khalifa also said the sovereign wealth funds – of which the Abu Dhabi Investment Authority, or Adia, is the world’s biggest – made decisions along economic not political lines.
‘The estimations you have mentioned are exaggerated and they do not reflect the truth and the size of Emirati investments abroad,’ he said, when asked whether the value of the funds’ investments abroad exceeded $800 billion.
‘The sovereign funds which you have referred to, operate according to economic principles, not political considerations.’
Swollen by windfall oil revenues and foreign currency reserves, global sovereign wealth funds hold assets of between $1.9 trillion and $2.9 trillion, the US Treasury Department estimates.
Gulf-based funds such as Adia or the Kuwait Investment Authority have played key roles in capital-raising efforts by Western banks suffering from writedowns stemming from the credit crisis.
They have also stoked concern that some Western countries could lose control over key industries.
The UAE is the world’s fifth-largest oil exporter and Abu Dhabi, home to most of the country’s reserves, has been using part of its record oil revenues to diversify its economy and invest abroad.
