Date: 22/06/2008
Source: Department of Minerals and Energy
Title: SA: Sonjica: Address at Jeddah Energy meeting

Speech by Ms Buyelwa Sonjica, MP, Minister of Minerals and Energy, South Africa, at the Jeddah Energy Meeting in Saudi Arabia

Our host, HE Mr Ali I Al-Naimi, the Minister of Petroleum and Mineral Resources in Saudi Arabia
Fellow ministers from both petroleum producing and non-producing nations
Representatives from the international petroleum industry
Honoured Guests
Ladies and gentlemen

Let me begin by thanking the Custodian of the Two Holy Mosques King Abdullah bin Abdul Aziz Al-Saud, for convening this important meeting.

It is my honour and privilege to address you at this august international gathering. The unacceptably high and volatile crude oil prices have adversely affected all the peoples of the world - rich and poor. It has resulted in huge and sporadic protests in the developed north, whilst in the same vein, inflicting severe pain and devastation to billions of peoples resident in the developing south.

This situation is further exacerbated by soaring food prices, creating a double edged sword especially for the poor. The world presently faces one of its most difficult economic periods since the 1970s. Many countries are facing slowing growth and rising inflation, a phenomenon not commonly seen in the past three decades. The peoples of Africa are especially vulnerable and their suffering is the most severe of all.

Rising economic growth combined with a long period of reasonable oil prices have resulted in demand for oil and energy rising considerably since 2001. The growth of China, India and other emerging markets has seen demand rise considerably since 2001. In 1986, China consumed two million barrels of oil per day (compared with about 16 million barrels per day in the United States (US) at the time.) By 2006, China was consuming more than seven comma four million barrels per day. In India, oil consumption has risen from just over one million barrels per day in 1990 to two comma six three million barrels per day today.

Crude oil is a hydrocarbon that must always be within reach. It has to be at levels that will make it accessible and sustainable to the benefit all nations who depend on it, thus mitigating against energy poverty.

The problem with the price increase is its secrecy and the non transparency. What is the actual factor or factors that affect the price? Is it growth, speculators or geopolitics? All is it a combination of these three at play at the same time?

We hear that diminishing supply is a factor that influences the price hike. However, the volatility in the rise of the present oil prices cannot simply be explained by mismatches in supply and demand. The fact that pension funds now see commodity indices as a tradable commodity means that the door has been opened to speculators having an undue influence on commodity prices.

This meeting could not have come at a better time. It is a response to my repeated, publicly expressed, frustration that in the world today, there is a paucity of platforms to debate and challenge these anomalies. We are pleased that the government and the peoples of this kingdom - one of the largest oil producing countries - have taken note and decided to provide us with a platform to debate and perhaps take the necessary corrective decisions.

In my opinion, the world cannot absorb a further increase of a similar magnitude without a serious reduction in economic growth. Such a scenario would be of benefit to no one, especially not to oil exporting countries. It is incumbent upon oil exporters to use some of the oil revenue to invest in development in oil importing countries so that these imbalances can be mitigated and that global growth can be achieved on a more equitable basis.

Those of us in Africa, who have to face - on a daily basis - the reality and the ignominy of poverty and underdevelopment, have an interest in an outcome that will create certainty and stability. We need stability of prices as well as the transparency in the pricing system to allow for proper planning. This, we believe, will have a positive impact, particularly, to the people of the developing world.

Having said all this, we are mindful of the reality that crude oil is a finite resource. We need to use it efficiently, effectively and sparingly. It is a non-renewable source.

We want to thank, once again, the government and the people of this great kingdom for organising this important gathering. I want to join my colleagues in applauding our host, HE Mr Ali I Al-Naimi, the Minister of Petroleum and Mineral Resources in Saudi Arabia, for affording us the opportunity to engage in objective and constructive dialogue to address these unprecedented high and volatile oil prices.

This gathering has brought under one roof, people who have the means to provide a solution. It is quite clear that unless drastic and bold interventions and sacrifices are made we are going to be in this untenable situation for many years to come. Having said this, however, let me express my appreciation to all the delegates in this auditorium for choosing to be part of those who are searching for a solution!

We trust that out of this meeting, will emerge a global community of consensus marked by stability, certainty and predictability.

Most importantly it will come up with a solution that will give hope to the billions of our people. They are watching in anticipation of an outcome that will deliver them from further impoverishment that some governments, especially in Africa, do not have financial capacity to mitigate against.

I thank you.

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Issued by: Department of Minerals and Energy
22 June 2008