Oil leader calls for key tax to be scrapped as...
Saudi prince says oil ‘will never again rise above $100’
Prince Alwaleed bin Talal, the billionaire Saudi businessman, said in a US television interview that he felt there was something artificial about the price when it rocketed above $100.
“If supply stays where it is, and demand remains weak, you better believe [the price of oil] is going to go down more,” he said in an interview with Maria Bartiromo of Fox Business News .
“But if some supply is taken off the market, and there’s some growth in demand, prices may go up. But I’m sure we’re never going to see $100 anymore. I said a year ago [that] the price of oil above $100 is artificial. It’s not correct.”
Oil has tumbled more than 56% from its June 2014 high of around $115 a barrel and in recent days dipped to below $50. One analyst has forecast a worst case $15.
The price has plummeted because of a combination of weak demand and a global supply glut. The Organisation of the Petroleum Exporting Countries (OPEC), has refused to cut production.
In the interview, Alwaleed said the Saudi government and other oil producers were caught off guard by the steep drop in oil prices.
He said the refusal to consider a production cut was a smart strategy aimed at preserving market share.
“The decision to not reduce production was prudent, smart and shrewd,” he said. “Because had Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others, which means Saudi Arabia would have had two negatives, less oil produced, and lower prices.”
His comments came as Malcolm Webb, Oil & Gas UK’s chief executive, urged the UK government to scrap one of the key taxes on on the industry.
He said: “Evidence of the threat from the falling oil price to UK investment and jobs is mounting daily with oil and gas companies cutting exploration and capital budgets and reviewing headcounts.
“The Treasury’s promise in last year’s Autumn Statement of a simplified tax allowance to encourage new investment must be delivered by Budget 2015 if it is to have any impact. However, with the continued falling and potentially sustained low oil price, this is no longer enough.
“We are encouraged to see a growing political and industry consensus around the now pressing need for more fundamental and urgent changes to the tax regime. With a significant amount of UK oil and gas production not even covering costs at a $50 oil price, the industry cannot carry the burden of a tax rate between 60 and 80 per cent.
“The credible and reasonable response for the Chancellor in his upcoming Budget, assuming the oil price has not recovered by then, is the abolition of the 30 per cent supplementary charge on corporation tax, which was introduced and then increased in direct response to rising oil prices, most recently in 2011. This would still leave oil and gas producers paying corporation tax at 30 per cent, a tax rate 50 per cent higher than the rest of British industry.
“In parallel, the Oil and Gas Authority must be rapidly resourced with the right capability and capacity to swiftly implement the recommendations of the Wood Review. The industry is resolutely focused on tackling the cost and efficiency challenge it faces to improve the competitiveness of North Sea operations. Oil & Gas UK is committed to playing a constructive part in this important process of reform and looks forward to working with governments and stakeholders to that end.”