Peter Davies, BP

Sets out the context for oil and energy today in respect to: oil and gas prices; shares of world primary energy consumption; and drivers for high oil prices (OPEC behaviour post 1999, strong demand growth in 2004, low spare capacity, geopolitics and energy as a financial commodity). The reasons why prices rose, even though market fundamentals weakened are examined and the prospects for 2006 are set out, in relation to: the call on OPEC being less than current OPEC production levels; and the risks relating to economic growth, supply delays and outages, and geopolitical uncertainties. Into the medium term it is anticipated that: spare capacity will build back to historic levels through to 2010; that oil prices will remain over $40 a barrel; and that although market forces are expected to respond, it could take a long time to reassert.

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