EU energy chief urges Opec to prove reserve capacity by increasing output

Sharm Al Shaikh: European Energy Commissioner Andris Piebalgs said yesterday that the Organisation of Petroleum Exporting Countries (Opec) should increase oil production to send a signal that it has the reserve capacity to deal with any shortages.

"I would say it [increasing Opec production] would be the right decision," he told Reuters in an interview.

"I would not say how or what size [of increase] but it would be the right decision, indicating that the reserve capacity is sufficient to respond if there is short-age in supply," he added.

Key players

At a meeting in Vienna in September, Opec ministers decided to increase oil supplies by 500,000 barrels a day to 27.25 million barrels per day from November.

"Opec is the only group of countries that have keys to this issue and could act really to confirm to the market that there is no need to worry about supply," added Piebalgs, speaking on the sidelines of an energy conference attended by European, African and Middle Eastern governments.

Piebalgs said he personally was concerned about the rise in the dollar price of oil, which hit a record high of $91.74 a barrel for London Brent crude yesterday. But the European Union was less worried because the fall of the dollar was cushioning the impact, he said.

"I am very much concerned because I don't see a real reason for the oil price spike... I see that the market is well supplied and at the same time I see nervousness in the market," the commissioner added.

But the high prices for oil are an incentive to invest in renewable sources of energy, he added.

Renewables

"So for renewables it is good news what is happening but we should understand that this will not happen automatically. Still governments need to have particular programmes... to support the penetration of renewable energy in the market," he said.

The natural gas industry is in a weaker position than the oil industry and if people replace gas it would be harder to switch back to gas later, he said.

"Of course in energy you cannot do anything in the short term, only medium term.

"But medium term is harmful to the gas industry because if the changes are being done then gas cannot come back," he said.