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Oil price must go up and climate be protected - forum

CONSUMERS agreed with producers in Davos that the oil price must eventually rise to ensure investment in future supply, while energy chiefs said more should be done now to protect the climate.

At its peak near US$150 a barrel in July, oil was clearly taking a toll on the global economy and eroding demand for fuel. But a more than US$100 collapse since then has slowed investment and raised the potential of tight supply when consumption picks up.

Many in the industry see US$60 to US$80 as a more desirable level, up to double yesterday's price of about US$41 a barrel.

"That seems to be what you need to get investment," BP Chief Executive Tony Hayward told the World Economic Forum in Davos yesterday.

To help push prices back toward that range, the Organization of the Petroleum Exporting Countries has agreed to cut 4.2 million barrels per day from September output levels.

OPEC, the supplier of about a third of the world's oil, has strictly enforced those curbs and said it was ready to cut more if the price remained low. OPEC Secretary-General Abdalla Salem El-Badri, speaking at the forum, expressed hope that global oil demand would pick up "by the end of this year or beginning of next year."

El-Badri said OPEC members will have reached the group's pledge of a drop of 4.2 million barrels per day by the end of this month.

After that "if we still have some downward problems, then OPEC will not hesitate to take some quantity out of the market," he said.

Nobuo Tanaka, executive director of the International Energy Agency, agreed consumers would have to pay more.

But low prices were needed now by a world economy that the International Monetary Fund has said will be at a near standstill this year.

"To stimulate the economy, you need a low price, but to stimulate investment long-term the price should be higher," he said. "In the mid to long term, oil prices will go up."

Any stimulus package for the world economy should be as environmentally friendly as possible, Tanaka said.

"If governments are spending ... for a stimulus package, why not spend it on renewables?" Tanaka added.

"It stimulates the economy short term and in the long term is sustainable. You kill two birds with one stone."

Renewable energy sources include wind and solar power.


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