Oil prices seem to be the thing that is having a global effect, coupled with poor financial management. China seems to have the deciding factor. See the article below;
OPEC members say low oil prices risk investment
The Associated PressPublished: October 28, 2008
LONDON: OPEC oil producers warned Tuesday that low oil prices have created a crisis situation that threatens key investment in production, pushing them to seek moderate price increases by cutting output.
Qatar's energy minister, Abdulla bin Hamad Al Attiyah, defended OPEC's decision last week to cut production by 1.5 million barrels a day, saying it was necessary amid falling demand due to the global economic turmoil.
He added that demand could be frozen for several years.
Fears of a sustained economic downturn have driven the price of oil down from a record $147.27 a barrel on July 11 to $64 a barrel Tuesday.
"You can't say to me 'Don't do it, you're the bad boy,' with no solution, no alternative," Al Attiyah said at an annual oil conference in London. "Who will give me guarantees that they will buy?"
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The two-day gathering of oil producing countries, companies, banks and others in London began as BP PLC, Europe's second-biggest oil producer behind Royal Dutch Shell PLC, reported a massive 83 percent rise in third-quarter net profit.
BP earned $8.05 billion for the July-to-September quarter on the back of surging energy prices and said it was well placed to continue to reap profits despite the fall in the oil price.
But United Arab Emirates energy minister Mohammed Bin Dhaen al-Hamli said that the current low prices were "very dangerous for the world's economy."
"We need an adequate, reasonable oil price that will continue to stimulate investment," he said. "I think this is really a crisis situation and I think it is very difficult to predict what's going to happen."
Al Attiyah, who has previously said that Qatar needs oil prices at the level of $55 to maintain its budget in the current financial year, said that the billions of dollars of energy projects under construction in Qatar were not yet under threat.
But OPEC Secretary-General Abdullah El-Badri said that member countries would think twice about investment in further oil production because they have other priorities including education and health.
Al-Hamli agreed. "I think we are in a price period now where it's extremely difficult ... to finance expensive projects," he said.
OPEC secretary-general El-Badri said the organization was not seeking a high oil price, but a moderate rise.
Qatar's Al Attiyah said a price of between $70 and $80 a barrel was reasonable, adding that he did not expect OPEC to convene another emergency session before its next planned gathering in December in Algeria.
Guy Caruso, head of the U.S. Energy Information Administration, said that the outlook for oil prices would depend on the timing and extent of a coming global recession, but forecast overall negative growth in oil demand this year, "probably continuing in 2009."
Caruso said a 4-5 percent fall in demand from the United States — equating to up to 2 million barrels of oil per day — would be only partially offset by growth in China where the desire for cars, heating and other luxuries from the rising middle classes had been expected to support demand.
"We haven't really seen the impact of the slowdown in growth in China yet," he said.
However, Fatih Birol, the International Energy Agency's chief economist, was more positive on demand from China and other emerging countries, noting that China has more than $2 trillion of reserves as well as strong current account and budget surpluses.
Birol said that emerging countries could "put a floor" under commodity prices generally.
"Don't underestimate the strength of the emerging economies, led by China," he said.
However, Birol added that the progress of low carbon technology in the energy industry was falling victim to the global credit crunch.
"There is a cataract in front of our eyes that we can't see the impact on issues of investment and climate change," he said.
