High oil prices could see demand destruction: Mriganka Jaipuriyar, Platts

OPEC needs to do something to release oil supply back into the market. Demand destruction is a very valid concern because going forward, alternative energy is also picking up pace, Mriganka Jaipuriyar, Associate Editorial Director, Asia & Middle East, Platts, tells ET Now.

Edited excerpts:

The Saudis, Kuwait and UAE are planning a Saturday meeting on OPEC. What do you expect from the oil producers?

The Saudi and UAE energy ministers are heading to Kuwait to have some preliminary discussions with their counterparts on what decision they should take when they meet in Vienna on June 22nd. This is going to be a very interesting meeting.

Yesterday Iran also came out and sent the message to OPEC that they should not take a decision without the consensus of all the OPEC members including Iran. The concern for Iran is that with the US sanctions likely to disrupt Iranian supply, the other OPEC members could take over some of their market share. This is a very valid concern. It will be interesting to see what decisions they make.


Last week in St Petersburg, both the Saudi and the Russian energy ministers said that they are willing to ease the supply cut agreement but the decision that OPEC really needs to take is at what rate will they release more supply into the market and at what pace and in what volumes.

At what level do you think crude cold could actually start hurting? I am sure the oil producers are aware that if energy prices remain higher, it could have an impact on global demand, global growth and consumption. They may decide not to cut prices in the short-term but the long-term implications again could really be bad for them?

Yes, that is one of their concerns. It is a very long-term concern that OPEC has had. In fact, that was one of the reasons why they agreed to the supply cut agreement in the first place. With oil at $80, concerns are already being expressed by India, China and the US that prices are getting too high and it is going to hurt their economies.

OPEC needs to do something to release that supply back into the market. Demand destruction is a very valid concern because going forward you have alternative energy which is already picking up pace. The IEA recently released a report where they said that by 2030 electric vehicles would displace 2.5 million barrels per day of oil demand. if you have significantly higher oil prices going forward, the incentive to invest in alternative energy which has already picked up pace because of climate change concerns and environmental concerns will become just that much more.