Chinese Premier Wen Jiaobo has announced that he wants to see an international regulatory system for oil and gas markets between producers and consumers.
Jiaobo, addressing the introductory session of the World Future Energy Summit in Abu Dhabi, said that “energy prices have deviated to a significant extent from the fundamentals of supply and demand,” for which he blamed speculation and political volatility.
To rectify this, Jiaobo called for an international mechanism, based around the G20, to help control prices, “to stabilize oil and gas markets.”
Jiaobo said the mechanism should be legally binding on members, and include forecasting of supply and demand, “early intervention,” and price co-ordination.
The idea can be seen as a rebuke to both OPEC, the producer’s cartel managing approximately 40% of global oil production, and the International Energy Agency, the body representing the largest oil consumers., as his proposed mechanism would replace their production controls and dialogue with a legally-binding automatic mechanism of punishment for manipulating the relationship between supply and demand.
Jiaobo did not give further details, but his proposal suggests something akin to British economist John Maynard Keynes’s proposal at the Bretton Woods conference for the Bancor, an international currency with binding regulatory means of controlling the value of currencies to avoid manipulation.
China has seen growth slow and inflation rise with higher oil prices, has previously complained about oil’s peg to the dollar and tried to boost the euro’s status as a reserve currency.
The idea is likely to be unpopular with Gulf producers, who currently enjoy the ability act as swing producers on oil markets.
Jiaobo called the continuing exploitation of fossil fuels “ a challenge to the sustainable development of mankind,” and issued a ringing endorsement of nuclear, branding it “safe, reliable and mature technology.” China currently has 27 nuclear plants under construction.
The Chinese Premier also said that the supply of natural gas – together with nuclear and renewable – is a national priority under the government’s current five-year plan, while emphasizing the country’s “commitment to raising internal supply,” a possible reference to China’s recently-launched and ambitious shale gas exploitation program.
