Examination of Witnesses (Questions 616-619)
MR NIGEL
WOOLEY, MR
RICHARD GUERRANT
AND MR
PAUL TRIMMER
17 JUNE 2008
Q616 Chairman: Gentlemen, thank you very
much for coming to this very important session of evidence. You
have heard some the reasons we want to ask you questions. I know
that they have been explained to you beforehand. We are grateful
to you for the information which you have already provided to
the Committee. I begin by asking you to introduce yourselves for
the record for the benefit of those who are listening to our proceedings.
Mr Wooley: I am Nigel Wooley,
the supply director of BP Gas Marketing.
Mr Trimmer: My name is Paul Trimmer
and I am with Royal Dutch Shell. We produce and buy and sell gas
in various countries across Europe.
Mr Guerrant: My name is Richard
Guerrant, one of the directors of the ExxonMobil UK group of companies.
I am responsible for natural gas marketing across Europe.
Q617 Chairman: This session marks
a change of gear for the inquiry in a way. Next week we have a
very significant number of the chief executive officers of the
`Big 6' coming in to talk about their work which will be fascinating.
Today we are looking at rather more specific issues that affect
your companies. The first blindingly obvious question from the
chair is: why are oil prices so high? Are they here to stay, and
to what extent does speculation contribute to those high prices?
That is the million-dollar question.
Mr Trimmer: If one looks at the
medium and long-term whilst Shell does not speculate on prices—I
shall not give a price forecast; if I did it would almost certainly
be wrong—there are certain fundamentals coming together
on the demand side which are impossible to deny, that is, growth
in demand in India, Indonesia and particularly China with the
build-up to the Olympics. That puts immense pressure on the demand
side. The populations and industrialisation of these areas are
set to grow, so there seems to be a very strong fundamental pressure
on the demand side. As to the supply side, the era of easy to
find but cheap to produce oil and gas is on the decline. We are
not finding the large oil and gas fields that have been around.
There are, therefore, two fundamentals coming together which appear
to push in the same direction and provide a medium to long-term
perspective. Reading the newspapers at the weekend, if you talk
about other things that may have an impact on prices, the amount
of money that is available to go into the markets has gone up
from less than £7 billion in 2004 to over £130 billion
this year. Presumably, a lot of that is going into the energy
markets. The flows of that money in and out of those markets can
have an effect. Certainly, from Shell's perspective we find it
difficult to rationalise all of the price movements on the basis
of the fundamentals alone, but whether or not that is a long-term
effect is difficult to determine.
Q618 Chairman: You do not know or
you are not telling us; it is one or the other.
Mr Trimmer: I am saying what I
believe to be the fundamentals which are pushing in one direction.
If you look at it over time it is pretty clear that prices are
heading in one direction.
Q619 Chairman: Gentlemen, I suspect
that you agree with the general thrust of that; it is not a very
controversial view. To what extent do you believe that speculation
plays a part in driving current market prices?
Mr Guerrant: To add just one more
comment, ExxonMobil believes that over the long term the fundamentals
of supply and demand drive the price. We are surprised about the
prices that you see today.
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