High oil prices around current levels are with us for at least the next two to three years.
High oil prices around current levels are with us for at least the next two to three years.
Petroleum giant BP can see nothing that is going to cause the collapse of the oil price within that time frame.
“It [the oil price] is going to be up there and it’s going to be volatile. There is nothing we can see that is going to collapse the price of oil over the next two to three years. It would take something dramatic to cause a huge reduction in global demand and we just don’t see it,” BP Australasian president Gerry Hueston said.
He told a Jackson MacDonald Terrace Forum lunch that it was unlikely the oil price would ever dip below $US40 a barrel in the medium term.
“It’s a mugs’ game predicting oil prices, but in the long term there is no reason why oil prices should be as high as they are,” Mr Hueston said.
“It is amazing how robust the world economy is with oil at $US60 a barrel.”
In a wide ranging discussion, Mr Hueston predicted an end to shopper docket petrol discounts, called for tax reform to encourage more investment in Australia and in developing alternative fuels.
Despite the doomsayers, “I don’t believe we are running out of oil. For the past 14 years, BP has always been able to replace the reserves it has used. Oil is not going to run out before the world runs out of its capacity to deal with the environment.”
Mr Hueston lamented the fact that there had been no significant oil found in Australia for some considerable time.
“That’s either because there is none there or because no-one is exploring, because there are no incentives to do so. I suspect the latter.”
He said the level of regulation developing in Australia was something that needed to be addressed federally and locally, on a corporate and a personal level.
“We will invest to keep our market here,” Mr Hueston said in reference to BP’s Kwinana refinery, which was commissioned 50 years ago.
“But future refining investment is more likely to be in Asia.
“Looking at the differences between Australia and Asia on such things as depreciation rates and corporate tax, it’s a no brainer. Australia loses every time.”
The big supermarket chains, Woolworths and Coles Myer, now supply nearly half the retail petrol market.
The petrol discounts given by the supermarkets, virtually promotions aimed at securing market share, were not sustainable, Mr Hueston said.
“The margins aren’t there. There is not one cent to give away, let alone four cents. It’s cross subsidisation. Once the market reaches equilibrium, what then? The supermarket chains have got to recover those costs from somewhere. How long can it be sustained?” Mr Hueston said.
BP, one of the biggest companies in the world, has invested heavily into alternative fuels, including solar, biodiesel, ethanol and hydrogen power.
“If we end up in 2030 without significant biodiesel production in Australia, we have done the wrong thing.”
Mr Hueston said BP was also working closely with the ethanol industry to restore confidence in ethanol as an alternative and was carrying out major research into hydrogen power.
