Global policies sought to deal with soaring energy costs

MADRID, Spain - As oil set a new record, top industry executives and a senior European Union official urged the world yesterday to pull together in the face of skyrocketing energy prices, while acknowledging that - even if it does - costly crude is here to stay for years.

The comments to the World Petroleum Congress by EU Energy Commissioner Andris Piebalgs and the heads of Shell, BP and Spanish Repsol reflected a key theme of the four-day meeting - how to bring order into volatile and ever pricier oil and related energy markets.

Underlining their concerns, oil rose to a record high at $143.67 a barrel in early trading yesterday as expectations of a weaker dollar spurred investors to buy dollar-denominated oil futures as a hedge. Oil prices lost ground later in the day, settling at $140.00 on the New York Mercantile Exchange.

Oil's new peak underscored the somber tone of the conference's opening session. While speakers expressed hope that prices will stabilize after more than tripling over the past three years, they agreed that they are unlikely to return to their 2005 levels.

"We need a global effort to improve our resilience," Piebalgs told delegates packing a cavernous plenary hall, while acknowledging that "there is no silver bullet" to lower prices, ease concerns about supply and reduce speculative investments propelling markets upward.

"If the EU with 27 countries ... could agree on common [energy] policies, I believe we can do it in the global forum," he said.

British Petroleum Chief Executive Officer Tony Hayward warned against hopes that present high prices are a bubble that will burst the same way that they did in the 1970s, saying the supply-and-demand picture had changed since them.

"The era of cheap energy is probably over at least for the medium term," he said.

"The last time oil prices surged to this level, new production from the North Sea and Alaska helped bring prices down," but now there are no new sources of "easy oil" to compensate, he said. Instead, Hayward said, OPEC production fell by 350,000 barrels a day last year - although demand has grown for five consecutive years - and in Russia, "production has started to decline."

While agreeing with Hayward that there was enough crude in the ground, Shell chief Jeroen van der Veer acknowledged it was time to focus more on "difficult oil" - unconventional methods of recovery that are costlier and more complicated than the normal drilling process - to meet growing demand.

"There is hardly any additional access to easy oil," he said. "Most of the new supplies will be difficult oil."

Producers and refiners in the Spanish capital will be struggling to find answers not only on how to ensure stable supply, but also on doing it in a way that minimizes emissions of the greenhouse gases believed to cause global warming.

Repsol's Antonio Brufau said energy producer's challenge is "to produce more oil and to deliver ... products with stricter environmental standards." He and the others emphasized the importance of carbon trading and storage as strategies for the future.

Still, with oil bouncing from high to higher, the primary concern at the meeting was over availability and prices propelled higher by a potent mix of a falling dollar and rising demand.

Each time the dollar loses value, traders buy oil as a hedge; and the dollar appears set to fall further with Europe possibly moving toward interest rate increases as low U.S. rates stand firm.

Related topic galleries: Foreign Exchange Market, Petroleum Industry, New York Mercantile Exchange, Energy, BP Plc, Economic Policy, Commodity Markets

• HOTEL

• ARCHITECTS

• HVAC TECH

• AUTO TECHNICIAN

• BANKING - TELLER

• View all Top Jobs