GENEVA – Saudi Oil Minister Ali Ibrahim Al-Naimi on Monday warned that a “premature shift” towards renewable energy sources could jeopardize essential investment in oil and an economic recovery.
“I would voice caution against premature shift from fossil fuels to slowly evolving alternatives,” he said during a conference on energy and the environment here.
“Regardless of intentions, the consequences can be deeply counterproductive to global energy security and indeed to the natural environment,” he added.
“Diminishing investment in fossil fuels will impact our ability to provide the energy that will be needed when the economy turns around,” Naimi said.
Naimi and Iranian Oil Minister Gholam Hossein Nozari argued that while an “inclusive mix” of fossil fuels and renewables was essential to meet future needs, many alternatives to oil and gas were still costly and unproven.
Fossil fuels were expected to account for 80 percent of world energy needs.
Producers were also facing progressively lower levels of investment in fossil fuels in the economic crisis, despite the need to develop cleaner burning oil, better extraction, and update refineries, Naimi argued.
“The climate of uncertainty produces a strong sense of investment risk for producers,” he told the inaugural Energy Pact conference, organized by a group of energy traders in Geneva. Naimi also argued that the recent talk about peak oil – a finite natural limit to oil reserves – and a shift towards renewables increased speculation on oil markets.
“Today’s low prices are just as unsustainable as soaring prices,” he cautioned, saying that the “ideal” price for oil lies between $60-75 a barrel. “Forty dollars is not enough, you need in between 60 and 75 dollars to allow marginal producers to continue producing ethanol, heavy oil,” he said.” I would say that the ideal price for ability of the marginal producers to put more resources in the market is in between 60 and 75 dollars,” he added.
Naimi said such a price level was necessary to maintain the minimum viable levels of investment needed in the oil industry.
Oil prices slipped by more than two dollars on Monday, a day after OPEC decided against cutting output further and to try to enforce its existing production cap.
Brent North Sea crude for delivery in April shed $2.04 to $42.89 a barrel in early London trade while New York’s main futures contract, dropped $2.40 to $43.85 a barrel.
Some analysts had expected the meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna on Sunday – which Naimi took part in – to agree to further cuts in a bid to shore up prices.
OPEC, which pumps about 40 percent of world crude oil supplies, said it was delaying a possible cut until at least May. Oil ministers said they wanted to give the G20 rich and emerging nations time to respond to the economic crisis during their meeting in April. – AFP