The US wants to import less oil as it diversifies its energy sources and improves efficiency, says Steven Chu, the US secretary of energy who is on a visit to Saudi Arabia. The goal is part of an oil policy that is not "in conflict with the partnership we have with Saudi Arabia", the Nobel Prize-winning physicist said yesterday. Fossil fuels would be a part of the energy supply mix for a long time, he said, as oil prices rose above $80 a barrel.
Mr Chu is expected to visit Abu Dhabi tomorrow. The US is the world's largest consumer of oil, but demand has dropped in the past two years because of the recession and rising prices. In his election campaign, the US President Barack Obama promised to end oil imports from the Middle East and Venezuela within 10 years. Mr Chu also dismissed fears of a looming crisis from dwindling oil production, saying the market would adjust even if supplies were to decline.
"I don't see any peak in oil," he said, dismissing the idea that global oil production was at or near a peak, and expected to fall sharply because depletion was outrunning new discoveries. "I see a transition - to more expensive forms of oil", like those produced from harder-to-access fields and secondary recovery schemes, Mr Chu said. He also cast doubt over the widely held assumption that global oil demand had peaked and would begin to decline - a theory that has sparked concerns among major exporters.
Mr Chu said demand would remain strong in emerging economies, even if it fell in countries such as the US. He underscored the fact that the transport sector had no efficient alternative to diesel and petrol. "Will demand drop off precipitously? No," he said, adding that he did not believe it would fall at all. "Oil will be with us for a very long time." Crude broke above US$80 a barrel for the first time in more than a month yesterday on renewed optimism for a global economic recovery.
In electronic trading on the New York Mercantile Exchange yesterday, crude touched $80.51, its highest since January 13, before retreating to just below $80 after the start of the US trading session. The investment bank Goldman Sachs predicted crude would rise to between $85 and $95 a barrel this year as growth gathers pace. Positive news from the US and Japan had already lifted prices this year, while a tighter supply-demand balance could draw down OPEC spare capacity, Goldman said.
But Carsten Fritsch, an analyst at Germany's Commerzbank, said crude looked "toppish" at $80, given the weak market fundamentals. Toby Hassall, an analyst with CWA Global Markets in Sydney, said Europe's economic prospects were not looking strong. "We're just not seeing any significant improvement in western oil demand," Mr Hassall said. "I don't see crude oil sustaining any rallies at this point."
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