Economic fundamentals, and not financial market speculation, are responsible for the dramatic rise in the price of oil...
Economic fundamentals, and not financial market speculation, are responsible for the dramatic rise in the price of oil, with more investment needed in the energy sector, the chief executive of U.K. energy giant BP PLC (BP) wrote Wednesday.
In a comment piece in the Financial Times, Tony Hayward wrote that there were three myths with regard to increasing prices for energy: that speculation was behind the rise in oil prices; that the supply of fossil fuels was running out; and that the world could switch to a low-carbon economy quickly.
Hayward wrote that while global energy demand in 2007 was above average for a fifth year running, "energy supply has struggled to respond."
He said, however, that this wasn't to do with declining reserves, but instead with the technologies and policies used to extract those reserves, claiming that the "problems in bringing on new production are not so much below ground as above it, and not geological but political."
"Producers and consumers should be encouraged to respond to the market's signals," he wrote.
"High prices are saying that we need more investment - in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear."
New York's main oil futures contract, light sweet crude for July delivery, closed at $131.31 per barrel Tuesday, after rocketing to a record $139.12 Friday.
