DAVOS-Energy chiefs say oil price must rise to ensure supply

By Barbara Lewis

DAVOS, Switzerland, Jan 29 (Reuters) - Consumers agreed with producers in Davos that the oil price must eventually rise to ensure investment in future supply, while energy chiefs said more should be done now to protect the climate.

At its peak near $150 in July, oil was clearly taking a toll on the global economy and eroding demand for fuel. But a $100-plus collapse since then has slowed investment and raised the potential of tight supply when consumption picks up.

Many in the industry see $60-$80 as a more desireable level, up to double Thursday's price of around $41 a barrel.

"That seems to be what you need to get investment," BP Chief Executive Tony Hayward told the World Economic Forum in Davos on Thursday.

To help push prices back towards that range, the Organization of the Petroleum Exporting Countries agreed to cut 4.2 million barrels per day (bpd) from September output levels.

OPEC, supplier of about a third of the world's oil, has strictly enforced those curbs and said it was was ready to cut more if the price remained low. Ministers of the group meet on March 15 in Vienna.

"OPEC will not hesitate ... we are still reviewing," the group's Secretary-General, Abdullah al-Badri, said. "Even with $50 we cannot have a decent income for our members."

Nobuo Tanaka, executive director of the International Energy Agency, which advises 28 industrialised countries, agreed consumers would have to pay more.

But low prices were needed now by a world economy that the International Monetary Fund has said will be at a near standstill this year.

"To stimulate the economy, you need a low price, but to stimulate investment long-term the price should be higher," he said on the sidelines of the forum.

"In the mid to long term, oil prices will go up."

ENVIRONMENTALLY FRIENDLY

Any stimulus package for the world economy should be as environmentally friendly as possible, Tanaka said.

"If governments are spending ... for a stimulus package, why not spend it on renewables?" Tanaka added.

"It stimulates the economy short-term and in the long-term is sustainable. You kill two birds with one stone."

Renewable energy sources include wind and solar power.

As part of the drive to ensure diverse and secure energy supplies, the world must establish a price for carbon emissions, BP's Hayward said.

"We need the world to put a price on carbon," he said.

Carbon pricing involves penalising every tonne of planet-warming greenhouse gas emissions, whether using a carbon tax or a carbon market. The European Union has a carbon trading scheme but there is as yet no comprehensive global mechanism.

The IEA's Tanaka said that to diversify supply and help prevent a repeat of the upheaval caused by the Ukraine-Russia pricing dispute, which disrupted Russian gas flows to western Europe this month, the European Union needed an improved grid and a single energy market.

Azeri President Ilham Aliyev said Europe needed to show more political will and financial commitment to the planned Nabucco gas pipeline, which aims to cut western Europe's reliance on Russian gas supplies.

"There should be more political will, more financial commitment," said Aliyev, whose country is a major potential supplier of gas for the project bypassing Russia.

Sceptics of the Nabucco pipeline have voiced concern there will not be enough gas for the scheme. (Editing by Anthony Barker)