May 24, 2004 EU ENERGY COMMISSIONER LOYOLA DE PALACIO TACKLES OIL PRICES, Against the backdrop of rising oil prices, EU Commission Vice-President Loyola de Palacio told the International Energy Forum in Amsterdam that she strongly supported increased supply-side flexibility through investment in new, more efficient production capacities and urged consuming countries to use their political muscle to curb escalating oil demand by introducing energy-saving measures and targets. Commissioner de Palacio, who is responsible for energy and transport policy, said: “Oil price movements for the last months have provided a new wake-up call: it is not possible to separate domestic policies from their international implications and we must intensify co-operation between consumers and producers.” According to de Palacio, recent oil price movements are linked to both temporary and fundamental structural weaknesses in oil markets. She said it was unacceptable that, at a time of adequate supply, prices rise even above the ceilings agreed by producing nations. Among the factors behind the current hike in oil prices, de Palacio identified the threat of demand outstripping supply - as the oil needs of large consumers and economies such as the USA and China escalate - as well as the market perception of a higher-than-normal short-term risk to future supplies, which has spurred precautionary buying and a heightened level of speculation. De Palacio called for a more concerted approach at EU level in the management of strategic oil stocks and said the dialogue between producers and consumers should be intensified in an effort to prevent stronger speculative movements on the market. She also called for more vigorous promotion of energy efficiency and energy savings in order to reduce the impact of oil price volatility on EU economies. Regarding oil-producing countries, de Palacio outlined four steps which they need to take to stimulate investments:
De Palacio said producing countries should take all immediate measures to ensure the stability of oil prices and warned that lack of decision could undermine the credibility of OPEC [Organization of Petroleum Exporting Countries]. She also argued that oil price stability will only be possible if oil-producing countries and oil-consuming nations can work together with common interests and objectives.
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