Oil can actually be sold at US$20 a barrel, says Jala

18-07-2008: Oil can actually be sold at US$20 a barrel, says Jala
by Gan Yen Kuan
Email us your feedback at fd@bizedge.com
KUALA LUMPUR: Crude oil price is “commercially viable” to be sold at US$20 (about RM66) a barrel, judging from the existing reserves of oil majors in the world, according to Malaysian Airline System Bhd managing director and chief executive officer Datuk Seri Idris Jala.
The airline chief, who previously worked with Shell for more than 20 years, said the current oil price hovering around US$140 per barrel was “absolutely unfair” to the world economy.
“If you take a look at the oil companies’ portfolios, most of their existing reserves and productions — probably 90% of them — are commercially viable at US$20 per barrel.
“I was kind two months ago when I said the oil price should be US$40 a barrel. I believe that the US$100 on top of the US$40 is actually purely and highly speculative,” he said.
Jala was speaking as one of the panellists at the 2008 Leadership Forum Malaysia here yesterday.
“I don’t blame them. That is the nature of the market. If you have a free market, the speculation instruments are out there. Layers upon layers of speculative instruments are put on top of the real value.
“The question you have to ask is, what is the fair price of crude oil?” he added.
Jala said the world would likely go into recession if oil prices hit US$200 a barrel.
He noted that it would still take a long time for biofuel to be seriously considered as an alternative to fossil fuel.
Earlier at the forum, General Electric Co Southeast Asia president Stuart Dean said: “We talked to oil and gas companies. They don’t believe the price is reasonable. So, it’s truly a speculative aspect. It’s going to correct at some point but we don’t know when.”