Rabat, Asharq Al-Awsat- Ali Al-Naimi, Saudi minister of petroleum and mineral resources, has declared that it is difficult, if not impossible, to predict the future price of oil, which has now exceeded $100, because the factor that will decide the price is speculation in the future markets.
After presiding over the opening session of the 14th meeting of the Advisory Committee of the Mineral Resources Sector in the Arab countries in Rabat, Al-Naimi told Asharq al-Awsat that the task of the oil-producing countries is to ensure the soundness of the foundations of the oil business.
He said,” As producers and exporters, it interests us to let supply and demand be equal to each other and to ensure that the oil reserves in the consumer countries remain at stable and moderate levels.”
The petroleum minister went on to say that in the past the oil price hinged on these foundations and that today, there is no connection between the foundations of the oil business and the price.
He added that the factors that influenced the oil price had always been global economic growth and the geopolitical situation of the oil-producing countries. However, market speculations and the purchase of future stocks recently entered into the equation. These new factors, he pointed out, are having a significant impact on market fluctuations and as a result, it has become difficult to maintain price stability because world financiers found a new way of making profits by pumping large sums into the operations of future stocks. He remarked that for this reason no single country or organization can control the price.
Al-Naimi pointed out that OPEC sees no reason to raise production at this time because it is taking into account the foundations of this business, namely, supply, demand, and reserves. He said that “if these foundations remain stable and meet the market’s requirements, there is no need to either raise or cut production.”
In his speech to the Advisory Committee’s opening session, Al-Naimi said that during the past two years, the prices of precious metals, iron ore, and steel rose steeply. The price of an ounce of gold, which was $350in 2003, rose to more than $900. The average price of copper was $2,000 per ton but is now $8,500. The average price of iron ore pellets used to be around $52per ton but is now nearly $130.
Al-Naimi attributed the rapid rise of metal prices to a number of causes. He said that they include the rapid growth of the global economy, the increasing demand for metals especially by some countries with large economies like India, China, Japan, and the United States, the depletion of metal ore reserves in some producing countries, higher global inflation rates, the drop in the value of the dollar against numerous other currencies, and the higher costs of metal production for various reasons including the need to protect the environment and rising technical costs.
Al-Naimi called for encouraging local and foreign companies in the Arab world to invest in the metallurgy sector and obtain licenses to discover and exploit metal ores. He said that the Arab countries are qualified to occupy a distinctive status in extracting and manufacturing precious metal ores in addition to iron and nickel ores.
For his part, Muhammad Bin-Yusuf, director general of the Arab Organization for Industrial Growth and Metallurgy, said that the known metal ore reserves in the Arab world have begun to run out and that the level of discovery and extraction is limited despite the efforts made by some Arab countries. For this reason he called for the adoption of medium- and long-term development strategies for iron, nickel, and copper producers. He explained that this can be done by relying on various financing structures that are suitable for this type of investment.
He added that the Arab metallurgy sector requires risk investments for discovery and extraction that are based on national, regional, and global policies that will encourage investment by linking metallurgical ventures with the industries that are associated with them.
Bin-Yusuf added that direct foreign investments in the Arab countries achieved record returns in the past few years, noting that they amounted to $62.5 billion in 2006. He said that this is the reason why one can feel optimistic about the future of metal extraction in the Arab world in the next few years.