Investment needed to stave off EU oil crisis

Investment is needed in increasing refining capacity and developing alternative energy sources if oil price rises are to be avoided.

This was the message to MEPs on Wednesday from Andris Piebalgs, EU Energy Commissioner.

Piebalgs said that the European Commission was “highly concerned about the unprecedented rise in prices” in the oil sector, caused by increasing demand in China and the US.

“In such circumstances – where there is limited spare capacity – specific events, such as the war in Iraq and hurricane Katrina, fuel speculation, pushing prices ever higher.”

He admitted that the commission alone could not solve the problem of high oil prices, but unveiled a series of measures he hoped would “make a significant contribution towards bringing prices to more reasonable levels”.

The key, he said, was to increase supply at the same time as reducing demand. Oil producing nations have agreed to sell more crude, but this will be ineffective unless there is a significant increase in refining capacity.

“I will be meeting shortly with executives from the major oil companies, as I consider it very important that oil companies behave in the most responsible manner given this situation.”

“In particular, I will insist on the need for more investment by them, and to determine which additional measures can be taken to remove bottlenecks preventing further investment, particularly in refining capacity.”

Alternative sources

Reducing demand for oil, through the promotion of alternative fuel sources, was even more important, Piebalgs said.  

“The commission has already identified the potential for Europe to save as much as 20 per cent of its existing energy use in a cost effective manner.” Existing legislation could already generate 10 per cent of this energy saving, he said.

“However, for Europe alone to save energy will not provide an answer. The real challenge is to push for energy policies abroad that also focus on constraining demand rather than simply increasing the supply of oil and gas.”

Biomass, wind, wave, solar and hydrogen power sources were all being investigated by the EU, Piebalgs said, and he would be pushing for similar tests in other countries.

With the commission’s long-term aim to reduce oil demand, Piebalgs reiterated that reducing taxes on oil to compensate for short-term price rises was not the solution.

“This only encourages consumers to continue to consume.”

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