Chris Trevor (Flynn, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on the outcomes of the international oil summit in Jeddah over the weekend?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

The government is pleased to have participated in the international oil summit in Jeddah over the weekend. This is a government which wishes to be a part of the solution to global oil, not just a part of the problem. We believe in making a positive contribution to dealing with what is the third-greatest oil shock we have seen in modern history and certainly the greatest shock since the 1970s. Governments around the world are struggling with the same challenge, which is why the Kingdom of Saudi Arabia, supported by the government of the United Kingdom and other participating states, met in Jeddah over the weekend to discuss a range of matters on both the global supply side and the global demand side.

Opening the conference, King Abdullah confirmed that Saudi Arabia had increased its daily production from nine million barrels to 9.7 million barrels. This increase in supply is an important step to put downward pressure on oil prices, but this will be a long-term process. It was welcomed by many nations. Australia was represented at the summit by the Minister for Resources and Energy, who called for action on the supply side, including investment in additional capacity, more efficient production technology and liberalisation of investment restrictions. All these measures are necessary if we are going to deal with longer term constraints to supply. If you look at successive reports by the International Energy Agency and others, our problem lies in the absence of effective levels and intensity of foreign direct investment in many of the world’s oil-producing countries. As a result there is inefficiency of extraction and world’s second-, third- and fourth-best practice when it comes to getting oil out of the ground and to customers. That is why Minister Ferguson was taking these important contributions to the conference. These sentiments were supported by many other countries and reflected very much in the summit’s final communique. The communique recognised that ‘an appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are supplied in a timely and adequate manner’.

The communique also recognised that supply would benefit from enhanced cooperation ‘from oil-producing and consuming countries in investment technology and human resource development’. This is an important content of the communique, because of so much national political resistance on the part of OPEC states to liberalising their foreign investment regime. This does not solve all problems on that score, but it pushes the debate one step further in terms of getting greater access to those oil-producing states on the part of greater flows of foreign direct investment.

The Jeddah summit also focused on demand-side initiatives to again assist in taking some of the pressure off global oil prices. The final communique called for ‘energy efficiency to be promoted in all sectors through passing on market price signals, technology transfer and the sharing of best practices in energy production and consumption’. Australia welcomes global cooperation—the demand-side initiatives as well—especially efforts aimed at increasing energy efficiency.

The Jeddah summit also recognised the need for transparency and regulation of financial markets to assist in combating the problem of speculation. The British Prime Minister, Gordon Brown, addressed this matter in his speech to the summit. He said:

While the price of oil is driven primarily by fundamental demand and supply factors, there has been a substantial growth in financial investor participation in the markets that may be exacerbating the underlying mismatch of supply and demand.

The Australian government supports this view—that is why we support the recognition, in the summit’s final communique, that the ‘quality, completeness and timeliness of oil data should be enhanced with a view to improving market transparency and stability’.

The Jeddah summit is one step forward in terms of greater global cooperation on the challenge of meeting what is a demonstrably global oil crisis. There is, however, much more work to be done. As I said in my answer to the earlier question from the Leader of the Opposition, it is critical that we act cooperatively globally with other states, particularly those responsible for the bulk of global oil production and supply. Working with developing countries such as China and India, which represent such a huge proportion of new global demand and therefore push up global prices for oil, is equally important. On the domestic front, it is important to invest appropriately in an alternative fuel strategy and a national energy security strategy for Australia—of a type we do not have and which the government did not inherit when it assumed office only six months ago. It is important that we invest in the future of fuel-efficient cars and public transport.

It is also important that we deliver the measures contained in the budget to assist the family budget. A typical young family of mum, dad and two kids is, as a result of the budget measures, $52 a week better off, but, as a consequence of one of the four policies advocated by those opposite on the question of the price of petrol, that family would be $2.50 a week better off. The contrast, I think, is clear.