Cheaper oil can provide a short-term economic boost, but for the longer term the world needs a much higher price to ensure the plentiful fossil fuel supplies on which it depends, OPEC leaders said on Monday.
On Sunday, the Organization of the Petroleum Exporting Countries agreed not to enforce deeper supply curbs for now, citing the extreme weakness of the world economy, but it called another meeting at the end of May to reassess the market.
Saudi Arabian Oil Minister Ali al-Naimi said on Monday oil at around $40 a barrel was too low to guarantee investment and reiterated the kingdom's earlier comment that prices of up to $75 were needed to bring on new production capacity.
But on arriving in Geneva for an energy and environment conference, he told reporters he was "very happy" with Sunday's output policy decision taken at OPEC's Vienna headquarters.
OPEC Secretary General Adullah al-Badri told Reuters the group might be forced to take drastic action at its next meeting on May 28.
"We really cannot go too long because at this price there is no way we can invest," Badri said.
Some members of OPEC had wanted the 12-member producer group to agree a new cut at its meeting on Sunday, but from the outset Saudi Arabia had said the best plan for now was better compliance with agreements in place since September to reduce production by 4.2 million bpd.
Badri said 100 percent output discipline was not possible for technical reasons, but he said an improvement on current rates of around 80 percent would help to draw down stocks that have swollen as reduced economic activity has eroded fuel demand.
LONGER TERM PRICE
Representatives of consumers and producers alike have said oil will eventually rally in any case if weak prices stifle investment. Badri warned more oil projects could be at risk in addition to the 35 that he said OPEC members had already postponed.
For the world economy, however, cheaper oil amounted to a stimulus of more than $2 trillion, he said, trumping comment by the International Energy Agency earlier this month that oil around $40 compared with last year's average of nearly $100 would give consumer countries a $1 trillion boost.
The producers have argued any short-term gain has a price for consumers as well as producers.
"Today's low oil prices are just as unsustainable as soaring prices," Naimi said in his speech in Geneva.
He said fossil fuels would be a vital part of the energy mix for years and would require heavy investment to ensure their production was as clean and efficient as possible.
"Given their massive scale, non-renewables will remain the world's energy work-horse for many decades to come," Naimi said.
"… there is no excuse to pin our hopes only on alternatives, which today are just supplemental energies," he said. "Our immediate focus, then, must be to make fossil fuels cleaner and more efficient."
