KUALA LUMPUR (ICIS)--Stimulating economic growth to boost demand should be prioritised over finding ways to curb the global oil surplus, which has been depressing crude prices, Malaysian Prime Minister Abdul Razak Najib said on Monday.
“We should instead be concentrating on stimulating economic growth that will in turn elevate demand,” Najib said in his keynote address at the 18th Asia Oil and Gas Conference (AOGC) in Kuala Lumpur.
Brent crude is currently trading at around $65/bbl compared with $110/bbl a year ago, partly attributed to record high crude production in the US.
Notwithstanding the sharp fall in crude prices, Najib noted three facts: “First, energy is essential for supporting growth; second Asia continues to be a force for future growth; and third, the key the key to sustainable development is to make the most of the opportunities during challenging times, to innovate and reform.”
It has taken many years for the global economy to recover from financial crisis of 2008 and that growth is still fragile in the developed world, Najib said.
In spite of the global economic crisis, energy demand had continued to rise as a result of sharp increase in energy requirements from Asia, which in 2013 accounted for 41.5% of global energy consumption, up from 36.4% in 2008.
This can be partly attributed to the region having “the most precious resources of all – young, increasingly well-educated and skilled people”, Najib said.
Asia’s population has increased by 33% since 1990 compared with a 20% growth for the rest of the world, that it is not surprising that Asia’s 2014 economic growth of 6.9% was nearly triple that of the world average of 2.6%, the Malaysian PM said.
China is a major contributor to the population expansion, but cautioned that growth in the world’s second biggest economy is expected to slow down this year to 7% - the lowest in 25 years, as the country focuses on quality and efficiency of the economy, he said.
Najib noted that although China continues to advance at a healthy rate, the nation’s oil demand will not be as high. A GDP growth rate of 7% translates to oil demand growth of only 2%, which could decelerate to around 1% on an annual basis from 2020 to 2030.
China’s slowdown, however, does not remove Asia from the global economic centre stage, he said, citing that the ASEAN (Association of Southeast Asian Nations) -10 economies have grown by 300% in size since 2001. A combined ASEAN would rank as the seventh largest economy in the world and that by 2050 at the latest, the region is expected to be the fourth largest.
With 600m people, ASEAN has the world third-largest workforce. Its consumer growth and energy demand being boosted urbanisation and a burgeoning middle class, which is expected to reach 144m by 2017.
With ASEAN’s current energy consumption at only half the global average, a considerable increase in demand is to be expected, Najib said.
The establishment of the ASEAN Economic Community by the end of 2015 will lead to a freer flow of goods and services investment and skilled labour across the region, the Malaysian government leader said.