BP: Transparency will curb oil price volatility

Improved transparency in the oil market could curb sharp fluctuations in crude prices like those seen last year, according to an expert from BP.

Christof Ruehl, the UK-based oil major's chief economist, dismissed suggestions that Opec should revive its previous policy of setting a price range for controlling volatility.

He said last July's oil price surge to $147 (Dh539) per barrel had been caused by supply and demand imbalances rather than speculation, as Opec had claimed.

"I am not convinced that speculation played a significant role," he said. "Concerning the revived proposals for the creation of an oil price band mechanism as a way to tackle oil price volatility, this could lead to an inefficient allocation of resources. It would be a bureaucratic nightmare and it would not work."

Opec adopted a price band of $22 to $28 some years ago but decided to abandon the target and leave prices to be determined by the market.

Ruehl made his comments during a lecture at the International Energy Forum (IEF) in Riyadh. The forum is made up of more than 100 oil producers and consumers and provides output information through its Joint Oil Data Initiative (Jodi).

"Ruehl did consider more data transparency a useful way to limit oil price volatility," said an IEF spokesman. "He cited the positive impact of the IEF-coordinated Jodi and encouraged its ongoing efforts to deliver better, more timely data to further increase market transparency."

IEF Secretary General Noé van Hulst said: "At least everybody agrees that more data transparency through Jodi is the key to dampening oil price volatility."

He said a steering group established as a follow-up to last December's London Energy Meeting work was examining the causes of energy market volatility, including the linkage between the financial and energy markets.

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