The documents that are relevant to the comments in this note are those prepared by the Energy Future Coalition, namely "Challenge and Opportunity: charting a new energy future", Appendix A: Working Group reports, and the corresponding Executive Summary. The article, "The Future of Energy Policy", by Wirth T., et al., published in the July/August edition of Foreign Affairs, reiterates the points made in those documents.

The three "great challenges" that US energy policies have "failed to address", are, as stated in the two documents, as follows:

2. The risk to the global environment from climate change;

3. The lack of access by the world's poor to modern energy services.

This note makes some remarks on each of these points, addressing issues that are of particular concern to developing OPEC member countriesoil-producing countries.

1. The energy security issue

Over the past three decades, US energy policy has evidently been geared to decreasing dependence upon oil. However, US oil import dependency has, in fact, steadily risen; but, in a worldwide integrated oil market, this should not be regarded as a particularly significant development. We should instead ask ourselves, is there a need to redefine energy security?

Ultimately, it is not the level of import dependency, or the diversity of supply that guarantees security. Rather, it is the availability of a buffer of what we might term surge capacity that can deal with market volatility, which might be caused, for example, by fluctuating economic activity, weather patterns, or external events. It is precisely this role that OPEC has successfully assumed.

Major oil-producing countries, mainly OPEC Countries, but also others such as Mexico, Norway and recently Russia, have over the years, but in particular the last two decades OPEC Member Countries are committed themselves to working together to ensure the security of the oil market by maintaining a stability of supply and a stability of price. This commitment has played — and will continue to play — a pivotal role in the oil market, now and in the future. The key means the Organization major producers uses to fulfil this commitment for market stability isare the OPEC price band of $22 between $28 per barrel and the maintenance (at a substantial cost) of sufficient idle/spare capacity to be brought on line quickly to meet fluctuating market needs. Since its adoption, the OPEC price band has provided a workable, macro-economic solution that allows sufficient flexibility in prices to allow the market to breathe, while at the same time, keeping prices at levels considered to be stable, fair and reasonable for both, consumers and producers, as well as providing good returns on investment, thus allowing investment in additional capacity from a variety of regions. Consumers on the other hand have committed themselves to build Strategic Petroleum Resourceerves (SPR) that complement OPEC’s surplus capacity for use in emergencies, should that be needed over and above producers’ spare capacity.

One of the first important uses of the band was in the fourth quarter of 2001, when prices dropped to $17/b, well below the band’s lower limit. OPEC was able to coordinate efforts with several important non-OPEC producers at that time — namely, Norway, Russia, Mexico, Oman and Angola—to stabilize the market by agreeing to make production or export cuts. The band mechanism was activated again in the fourth quarter of 2002, when prices rose on market concern over the Venezuelan oil worker’s strike. During the strike, the country’s oil production dropped from 3 million b/d to only 200,000 b/d. In response, prices rose to two yeartwo-year highs; OPEC responded rapidly to the situation, and within three days had organized an Extraordinary Meeting of the Conference, during which the Member Countries decided to raise the OPEC-10 ceiling by 1.5m b/d.

The record of the global oil markets in dealing with major supply disruptions during the past fifteen years, in particular, is truly impressive. As these above reviewand other situations have demonstrated, OPEC, in cooperation with other major producers, has played an important role in ensuring market stability, both in terms of price as well as in supply. It is a role that the Organization will is expected to continue to play well into the future. Should any disruptions or emergencies threaten the stability of the market, then OPEC will be ready to use its influence, and its spare capacity, to maintain prices in a reasonable range for both consumers and producers. Thus, in the context of the discussions expected at the forthcoming meeting of the Energy Permanent Monitoring Panel of the World Federation of Scientists, it is incongruous to associate the stability of the oil market, as engineered by OPEC Ministers, but also as and supported by non-OPEC producers, with the idea of a threat to energy security. To the contrary, records over the last year showed that oil and energy markets remained relatively stable, despite large disruptions of supply from Venezuela, Nigeria and Iraq.

In his testimony before the US Senate Committee on Foreign Relations, Subcommittee on international Economic Policy, Export and Trade Promotion (April 8, 2003), Vahan Zanoyan Energy expert and President of PFC Energy, stated "while our country is at war with a major producer in the Persian Gulf, while Venezuelan production has not fully recovered from a devastating collapse in output, and while the Nigerian production was down by 750,000 b/d in the past two weeks, the United States managed to record the highest imports of crude oil ever, amid declining prices from their recent highs. IF THIS IS NOT SUPPLY SECURITY, I DON’T KNOW WHAT IT IS."

Nevertheless, the task of making economically-sound investment decisions that are geared to ensuring that sufficient capacity exists in the future is exacerbated by the tremendous uncertainties that pervade the drivers of oil demand. These include not only uncertainty over economic growth, but also policy and technology developments. These uncertainties illustrate the scope of the challenges confronting the oil industry, especially given the long lead-time nature of oil industry investment. Market stability, at reasonable and sustainable prices, is a key prerequisite for rising to these challenges, and, since market forces alone are not enough to guarantee this, a broad base of cooperative efforts will be needed to increase the chances of meeting this fundamental objective. This, in turn, points to the genuine and important concerns of developing country oil exporters over the security of demand for the exports for which so much investment will be needed. The framework set out in the above cited documents, in particular with the dramatic goal of reducing oil consumption in the US by one third over the next 25 years (and, more generally, to reduce global oil consumption), serves to underscore the fragility of this other side of the security coin, and could easily be construed as destabilising and contradictory to broader and increasingly more acceptable notions of energy security.

Before concluding comments on this "objective", it is worth recalling that many energy experts are pointing to the different security challenges posed by crude oil and natural gas, globally, and particularly for the US. Oil is a global commodity. Conditions in crude oil markets all over the world change together. Global oil markets "equilibrate" so to speak. Gas is not yet a global commodity. Even though vast natural gas resources exist in various parts of the world, they remain stranded because natural gas cannot be transported as easily as crude oil. Global gas markets do not equilibrate – thus a greater security challenge to the US and other major consuming regions of the world!

Oil is an extremely important and valuable global energy resource, and will remain so for long time. It is imperative that it is treated objectively, and dependence on oil should not be considered intrinsically or arbitrarily bad. Crude oil resources are too important, as reliable and affordable energy source for all humanity to be judged "undesirable for the future" as a given fact.

Over the past decade, oil-producing countries, OPEC and its Member Countries in particular, have taken a keen and active interest in the ongoing climate change negotiations. OPEC's Producers’ concerns over possible measures to mitigate greenhouse gas emissions, although well documented, are still far from well understood. OPEC member Oil-producing and exporting countries, including in particular Middle Eastern OPEC countries, themselves would stand to bae among the worst affected from the possible impacts of climate change. But any measures that are introduced must take into account broader and legitimate concernsofconcerns of all parties. Firstly, it has been demonstrated in numerous studies, and documented in the latest Assessment Report of the Intergovernmaenetal Panel on Climate Change, that oil exportingoil-exporting countries would probably suffer losses running into tens of billions of dollars over the coming decade, should measures be implemented to ensure that Annex I Parties reach their Kyoto emission targets. Indeed, these concerns are enshrined in Article 4.8 of the Framework Convention and Articles 2.3 and 3.14 of the Kyoto Protocol, obliging Annex I countries to strive to minimise economic damage suffered by oil exporters as a result of such measures.

Access to advanced forms of energy services has a central role to play in achieving sustainable development objectives. However, while there is the understandable call to develop renewables, the fact remains that the technology is still in its infancy. While the renewable energy industry is being developed as it should, all other available resources, which are friendly to the environment, must also be accessed, enhanced and utilised as equal footing, to ensure that development objectives are accorded the highest possible priority. Petroleum will feature prominently in this.

Indeed, while at the World Summit on Sustainable Development, held in Johannesburg in 2002, a great deal of attention was focused on the promise of renewable resources, most participants recognized that fossil fuels will continue to account for the lion’s share of future increases in energy demand in developing and the developed world. The Report recognized (2^nd paragraph from the Executive Summary) that abundant, affordable energy has enabled developed societies to achieve unprecedented property. Developing countries should have at their disposal all options and possibilities to benefit from the same.

Although the background papers emphasise the impact of new processes on the acceptability of coal use, advances in technology also continue to make oil and gas cleaner fuels. The successful development of carbon dioxide sequestration technology will ensure that all fossil fuels, including oil, will continue to serve the needs of mankind for the foreseeable future. For example, clean oil integrated gasification combined cycle (OIGCC) power plants will be far more attractive with the full development of CO₂ sequestration technologies. It is therefore of paramount importance to take advantage of all resource options – fossil, renewable and nuclear in the quest for sustainable development, and to thereby avoid compromising fundamental moral obligations. As we were so appositely reminded in the Caracas Declaration at the 2^nd OPEC Summit in 2000, as well as in the WSSD in Johannesburg in 2002 the, the biggest environmental tragedy facing the globe is human poverty.

Fossil fuels currently provide the dominant share (88%) of the world’s primary energy needs and are expected to continue to provide roughly this level through 2020. Given the rich multiplicity of mature and promising new technology options, and the complexity of the energy system and the environment within which it operates, it is not possible to make predictions about the exact nature of the optimal long-term, future global energy mix. I believe bit is therefore scientifically not sound to insist that one particular possible outcome as being the "Given Truth." Rather, it is prudent that all options, both technically feasible and economically promising, be considered and developed according to consistent and objective criteria.