Al Naimi speaks at G-8 Meeting of Energy Ministers 2 Rome

Al-Naimi said "Current oil market conditions are largely a reflection
of the negative impact of the global economic downturn, rather than
an indicator of things to come. While we do not know exactly when --
whether later this year or the next -- we can be certain that this
recession will end. And when the 'green shoots' of recovery begin to
take root, the combination of a growing global population and the
pent up yearning for prosperity in developing economies, will drive
the need for significant energy supply growth in the decades ahead --
much of it from fossil fuels.

Meeting these future energy requirements will be complicated by a
number of factors, including: growing concerns about climate change,
differing definitions of energy security on the parts of both
consumers and producers, imperfections in the workings of energy
markets and various above-ground constraints on deliverability. While
the hydrocarbon resource base is ultimately finite, this is not a
short- or medium-term issue as its massive size will not impose
constraints on supplies for many decades to come.

In the short-term, the low price, low demand environment discourages
substantive investment in petroleum development and infrastructure.
High development costs and tight credit markets are compounding the
difficulties. Furthermore, policies advocating a rapid shift away
from oil to unproven alternatives are fostering greater uncertainty
and investment risk. Capital dislikes uncertainty, and lack of
clarity related to energy policies may serve to exacerbate the trend
of underinvestment in the oil industry. Unintended consequences from
policies now under consideration could disrupt the functioning of
global energy markets, impact economic growth and ultimately lead to
an energy situation that is less secure than what we have today.

In the midst of this policy uncertainty and market turbulence, Saudi
Arabia continues to invest in new capacity across the ups and downs
of the business cycle. We are maintaining our long-term focus rather
than being swayed by the volatility of short-term conditions. While
some in the industry have delayed or canceled investments, we are
continuing to invest now in both the upstream and downstream to help
ensure an uninterrupted supply of energy when the global economy
recovers. However, if others do not begin to invest similarly in new
capacity expansion projects, we could see within two-to-three years
another price spike similar to or worse than what we witnessed in
2008.

While supply-side investment is critical to a global energy
security, I also believe that a core feature of any energy strategy
must be policies to promote increased energy efficiency and
conservation. Using our existing energy resources more wisely is a
critical step toward greater stability and sustainability. Policies
to promote conservation and efficiency are robust across any energy
future price scenario and will be the cheapest form of “new energy
supply” in many cases.

We must pursue a “balanced approach” which recognizes that in order
to achieve progress on energy security, economic development, and
environmental goals, the linkages and disparities among them must be
understood. A singular focus on one goal may undermine our efforts
to achieve our other goals.

--MORE