Page last updated at 23:22 GMT, Saturday, 21 June 2008 00:22 UK

Seeking an oil price solution

By Andrew Walker
BBC economics correspondent, in Jeddah

Gordon Brown
Gordon Brown will be offering a long term strategy
Gordon Brown is clearly taking the oil price seriously.

It looks like he will be the only head of government joining King Abdullah of Saudi Arabia, who is hosting a summit for major energy producers and users.

The formal meeting in Jeddah will last just a few hours and already senior officials here have said that Saudi Arabia has no "magic wand" to fix the problem.

And if they don't, sitting on top of the world's biggest oil reserves, it's not likely that anyone else has one.

Of course, the prime minister understands all this. But still Gordon Brown thinks it worth all the time and effort to come here.

He is not expecting a quick fix. He doesn't think the purpose of this meeting is to press for a short term increase in oil production - though he wouldn't complain if that did happen.

And in fact the Saudis have said they have already increased deliveries and will do so again if their buyers - which ultimately means refiners not motorists - ask for it.

Instead Gordon Brown has an agenda for the rather longer term.

Perhaps the most striking idea is his call for oil producers to invest more in other types of energy - renewables and even nuclear - in the rich countries.

Why would they want to invest in the competition?

Saudi man at a petrol station
The Saudis are ready to increase production

If they believe that the oil will run out, it might make sense. But then Opec countries, which have three quarters of world oil reserves don't seem to think that is going to happen for a long time.

There is also climate change.

If the oil producers believe that a global response is going to put oil out of business, they might do well to invest the petrodollars in something else.

And in one area, solar, Opec countries do have an advantage - they get lots of it.

But there is not much sign of that thinking taking hold. For Opec, the focus is very much on oil.

Mr Brown's other ideas include more information about supply and demand for oil to make the market less volatile.

It sounds good, but Opec countries, Saudi Arabia, Iran and Venezuela for example, are not generally enthusiastic about openness.

He also wants to encourage more investment in developing oilfields and refineries - an important part of the business where there is barely enough global capacity to keep up with rising demand for products, such as petrol and diesel, made from crude oil.

All of this is long-term stuff and is essential if oil supply is going to meet the expected increase in demand from growing economies, especially in Asia, over the next decade or more.

The call for investment in alternative energies sources is even more speculative.

What these ideas won't do is have much impact on the price at the pump next week or even next year.



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