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. --More
