Al-Naimi addresses London Energy Ministers Meeting 4 London

Lades and gentlemen, as the world's largest producer, exporter and
reserve holder, I can assure you that industry production costs have
not moved up or down by the orders of magnitude suggested by price
movements this year, further affirming the impact of non-fundamental
factors in oil prices.

King Abdullah's reference to a $75 per barrel target oil price is
fair and reasonable; it is the price that marginal producers need to
maintain investment sufficient to provide adequate supplies for
future oil consumption needs. When oil is priced lower, such as it is
now, there will be less investment and less future supply.
Eventually, this scenario is followed by a surge in prices as
supplies will not be sufficient to meet growth in consumption levels.
The world therefore would see extreme swings in prices to the
detriment of producers and consumers.
Oil is a long-term and capital-intensive industry. Stability and
predictability are essential for the success of this industry, and to
ensure the continuation of its positive contributions to global
economic development and prosperity; Stability, of course, means the
balance of supply and demand through the existence of reasonable
spare production capacity. Stability also means oil prices maintained
at a level that encourages investment, especially for alternative
energy sources. It means a level that provides a reasonable return to
producing countries, and does not harm the global economy -
particularly the economies of developing nations. Predictability is
the second most important element of a successful energy market and
energy industry, and it is best achieved through clear, transparent
information and policy by both producers and consumers. Shifting
policies lead to abrupt changes in patterns of consumption and
production, which are detrimental to the economy.
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