OPEC ministers, oil company heads gather

With prices skyrocketing and supply fears growing, energy ministers from the world's major producing nations and multinational oil company heads face unprecedented challenges at this year's World Petroleum Congress, reported CNN.

A student protests against the rising cost of fuel, June 20, 2008, in Manila, Philippines.

It wasn't always that way. Markets have been relatively steady most years since the congress first started meeting 19 years ago, allowing the thousands of delegates it draws annually to focus much of their attention on topics geared to catch the attention of energy insiders.

There is some of that too this year.

When the meeting opens Monday, world interest will be focused on what the more than 20 energy ministers from OPEC and elsewhere will have to say about how to quench raging market volatility, as well as on an oil market forecast to be released by the International Energy Agency on Tuesday. Still, at least some of the more than 3,000 delegates will be most drawn to the more than 600 research papers also being presented.

But as alarm grows that world economies may no longer be able to compensate for raging oil prices, this year's congress slogan says it all: "A World in Transition: Delivering Energy for Sustainable Growth."

The equation is simple, reflected by the knee-jerk of plummeting stock markets every time crude sets a new record.

Oil prices cannot rise indefinitely without world economies suffering -- and with them just about everyone using oil, gas or their derivatives whether it is to light a simple cooking fire somewhere in Africa, fill up at the pump in the United States or heat a 20-room mansion in Europe.

Environmental concerns that clash with the world's seeming readiness to pay for oil and gas at just about any price complicate the mix. Producers and refiners in the Spanish capital will be struggling to find answers not only on how to ensure stable supply, but also on doing it in a way that leaves a relatively small carbon footprint.

Organizers are seeking to reflect environmental awareness. They say that, for the first time, the meeting will offset its carbon emissions by neutralizing its greenhouse gas emissions through purchase of carbon credits that will be invested in a Guatemalan hydroelectric carbon plant. 

Still, statements from participants and organizers reflect the obvious -- that primary concern is over availability and prices.

"Increasing population growth, energy intensity and globalization has led to a phenomenal rise in the use of energy," World Petroleum Council president Randy Gossen said before the opening session. "The challenge for our industry is to ensure continuous, affordable and reliable energy supply in a sustainable, transparent, ethical and environmentally sound manner."

And Jorge Segrelles, chair of the meeting's organizing committee, said "the conference theme appropriately reflects what is happening in world markets." He added: "The industry must deliver and in a sustainable way."

But can it, against what seems to be all odds?

There is the weakening U.S. dollar; each time it loses traders buy oil as a hedge; and the greenback appears set to fall further with Europe possibly moving toward interest rate increases even as low U.S. rates stand firm -- trends that will see more investors abandon the American currency.

Adding to oil's more than twofold price rise in the past year is rising global demand, particularly in fast-growing economies such as China and India. Supply outages in the Middle East and Nigeria have also contributed, as has falling production in Mexico. And tensions over Iran, OPEC's second-largest producer, have added to volatility.

Even production hikes -- a traditional way of cooling the market -- have failed to stem the tide.

In Jeddah, Saudi Arabia, earlier this month, the kingdom said it would add 200,000 barrels per day in July to a 300,000 barrel per day production increase it first announced in May, raising total daily output to 9.7 million barrels. But that pledge disappointed the U.S. and other major consumers arguing that supply is not keeping up with demand, even as the Saudis and other OPEC members blame speculators and the swooning dollar.

Although the Saudi and other OPEC oil ministers are among those registered for the conference, they are not know to be carrying any solution to be presented while in Madrid. That has lowered expectations that any decisions here will cool the market.

"With the lack of anything substantial and significant coming out of the Jeddah meeting ... it is unlikely that any other forum or conference is going to surpass what didn't happen in Jeddah," said analyst John Hall of John Hall Associates in London.

"I think the markets are out of control," Hall said. "We don't understand why prices are where they are.

"And I can't see a solution until we can answer those questions."

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