Mark Finley, General Manager, Global Energy markets and US Economics, addressing reporters at a round-table discussion.

Doha • The key driver of higher oil prices is tighter supply and demand fundamentals rather than speculation and tighter refining capacity, according to Mark Finley, General Manager, BP Global Energy markets and US Economics.

He said if there were refining capacity constraints there would have been large quantities of crude oil on the market forcing the price down which is not the case.

"Refining constraint does not explain why overall crude prices have been rising sharply," said Finley who was here to make a presentation on the 2008 issue of BP Statistical Review of World Energy.

Despite high and volatile energy prices, the BP Statistical Review data shows the world's energy markets continue to deliver reliable energy supplies.

The world's fuel resource base remains sufficient to support growing levels of production. But the continued weakness in oil supply and increasing demand outside the Organization for Economic Cooperation (OECD) also points to the challenges in maintaining secure energy supplies.

Interestingly consumption in the oil-exporting regions of the Middle East, South and Central America and Africa accounted for two-thirds of the world's growth, according to BP Statistical Review.

The market's supply and demand fundamentals have tightened. The data in the BP Statistical Review shows that last year global oil consumption grew by one million barrels per day, slightly below the 10-year average but oil production fell, said Finley.

Global energy consumption growth remained robust in 2007, driven by above-average economic growth and despite continued high prices.

Finley said the decline in oil production was partly due to net production cuts by OPEC in addition to field maturity in OECD, where output declined by nearly 300,000 b/d.

OPEC production dropped by 350,000 b/d resulting from production cuts implemented in late 2006 and early last year. Among the 10 members participating in production cuts, crude oil output fell by 900,000 b/d.

"This has been a contributor to the tightening of the market fundamentals.

In the second half of last year oil inventories fell sharply and remain at or below historical levels," said Finley.

He said people are worried about future supply and demand fundamentals, about whether supply will continue to grow and about lack of spare capacity.

"Some of those concerns we think are exaggerated but is still fair to say that this is what people are worried about," said Finley.

Asked what is expected of OPEC to stabilize oil prices, Finley said: "there is a combination of factors that can help to address these imbalances. But national oil companies or private companies need to invest to take advantage of those ample reserves and to turn those reserves into production capacity."

"But the data shows right now it is not happening fast enough. Apparently that is because oil industry has constraints due to shortage of people, shortage of oil rigs, and we need time to expand capacity and hire skilled workers."

Finley said a number of governments who are the owners of these resources in many places around the world are making it more difficult to invest that easier with taxes being raised and making it more difficult to access reserves.