KUALA LUMPUR, June 7 (Bernama) -- An unjustifiably high oil price, risks jeopardising the fragile global economic recovery while undermining its stablilty, Prime Minister Datuk Seri Najib Tun Razak warned today.
Notwithstanding Malaysia's efforts to bolster economic resilience as a major trading nation, the country's prosperity is inevitably tied to the health and stability of the global economy, he said.
"(Hence) We should not let this fixation on what is an appropriate oil price level, detract us from the more important task of ensuring, it does not diverge from the underlying market and economic realities," he said.
The oil price has edged steadily upwards to around US$80 per barrel since last June - a level not seen in eighteen months.
This strengthening has come about despite the fact that demand growth has been fairly modest, particularly among the OECD countries, while global supply has remained ample according to OPEC.
"Undoubtely, the apparent mismatch between prices and supply/demand fundamentals, raises questions over whether oil markets have become "overheated"," he said at the 15th Annual Asia Oil and Gas Conference here, today.
Also present at the opening of the conference was Petronas' President and Chief Executive Officer, Datuk Shamsul Azhar Abbas.
Najib, who is also the Finance Minister, said some will view current and prospective demand increases, modest as it is, as being sufficient to justify a new, higher threshold price.
"Yet, others will say that with oil ceasing merely to be a source of energy, higher prices reflect the fact that as a commodity, it is today a much sought after financial asset," he added.
"Indeed, it is also noteworthy that despite the recession, industry costs continue to remain stubbornly high by historic standard.
"Whatever our views may be on what constitutes an appropriate price level, we can be assured that prices, even at these levels, will come under renewed pressure as the recovery gains momentum," he said.
According to Najib, over the long term, population growth trends, urbanisation and industrialisation in the emerging world, will continue to underpin historically-robust growth in energy demand.
"Under the circumstances, an adequate supply-side response is critical if market stability is to be restored.
"There should also be a greater oversight of the financial market, aimed at preventing price manipulation, if it leads to a more efficient and robust price formation," he highlighted.
He also said governments on the other hand, should take the initiative to create a more conducive environment and reaffirm their commitment to upholding transparency, as well as a functioning market as the ideal long-term guarantor of energy security.
"Governments should also establish clear and coherant national energy policies that help reduce variability in expectations of future demand. Such policies must be grounded in economic realities and be forward looking," he added.
He noted that an early multilateral commitment to a global strategy for transitioning to a low carbon economy is also desirable, to anchor expectations on both the speed of future energy demand growth and changes on the supply side.
-- BERNAMA
Notwithstanding Malaysia's efforts to bolster economic resilience as a major trading nation, the country's prosperity is inevitably tied to the health and stability of the global economy, he said.
"(Hence) We should not let this fixation on what is an appropriate oil price level, detract us from the more important task of ensuring, it does not diverge from the underlying market and economic realities," he said.
The oil price has edged steadily upwards to around US$80 per barrel since last June - a level not seen in eighteen months.
This strengthening has come about despite the fact that demand growth has been fairly modest, particularly among the OECD countries, while global supply has remained ample according to OPEC.
"Undoubtely, the apparent mismatch between prices and supply/demand fundamentals, raises questions over whether oil markets have become "overheated"," he said at the 15th Annual Asia Oil and Gas Conference here, today.
Also present at the opening of the conference was Petronas' President and Chief Executive Officer, Datuk Shamsul Azhar Abbas.
Najib, who is also the Finance Minister, said some will view current and prospective demand increases, modest as it is, as being sufficient to justify a new, higher threshold price.
"Yet, others will say that with oil ceasing merely to be a source of energy, higher prices reflect the fact that as a commodity, it is today a much sought after financial asset," he added.
"Indeed, it is also noteworthy that despite the recession, industry costs continue to remain stubbornly high by historic standard.
"Whatever our views may be on what constitutes an appropriate price level, we can be assured that prices, even at these levels, will come under renewed pressure as the recovery gains momentum," he said.
According to Najib, over the long term, population growth trends, urbanisation and industrialisation in the emerging world, will continue to underpin historically-robust growth in energy demand.
"Under the circumstances, an adequate supply-side response is critical if market stability is to be restored.
"There should also be a greater oversight of the financial market, aimed at preventing price manipulation, if it leads to a more efficient and robust price formation," he highlighted.
He also said governments on the other hand, should take the initiative to create a more conducive environment and reaffirm their commitment to upholding transparency, as well as a functioning market as the ideal long-term guarantor of energy security.
"Governments should also establish clear and coherant national energy policies that help reduce variability in expectations of future demand. Such policies must be grounded in economic realities and be forward looking," he added.
He noted that an early multilateral commitment to a global strategy for transitioning to a low carbon economy is also desirable, to anchor expectations on both the speed of future energy demand growth and changes on the supply side.
-- BERNAMA
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