New Delhi, Nov 26 (IANS) Speculation was the cause of the intense volatility in the oil prices rather than any other factor, the head of Saudi Arabia’s national oil company said here Wednesday.“It is obvious. When our King called for a meeting (in June), oil was around 130 (dollars per barrel). But, there was no shortage,” Abdallah S. Jum’ah, president and CEO of Saudi Aramco, the world’s largest oil company, said while delivering the GreatCorps World Business Statesman lecture.

“There was no need for the price to be where it was at that time. It’s obvious now that speculation played a lot (of role),” he said.

Further, he noted that the current steep drop in oil prices was due to “people dropping their contracts in order to monetize them”.

“(The fall in prices is) not determined by supply and demand,” said Jum’ah, who has headed Aramco for over 14 years and is slated to retire at end of December 2008.

Oil prices have swung at both ends of the spectrum this year - moving from near $150 in July to about $50 this month.

He said that Saudi Arabia had made a commitment to have a “cushion”, which will be a help during “hiccups”.

“This year, we have the capacity to produce 11 million barrels on a sustained basis. By the end of next year, the capacity is 12 million barrels,” he said.

Jum’ah was concerned that the continuing fall in prices will also affect future investments. He earlier said in his speech that the world would require an investment of $6 trillion by 2030 to keep up with the projected demand.

“If the prices deteriorate where it will discourage additional investment, yes you will find people are not investing,” he said.

As an oil executive, Jum’ah said he would like the price levels to be such that oil companies are able to make investments for additional facilities long-term.

“We have to wait and see. Irrespective of where the price is, what is required is certainty and stability, so that consumers and suppliers can plan with confidence,” he said.

Earlier, introducing Jum’ah to the audience, Reliance Industries chairman Mukesh Ambani said stable oil pricing was essential for economic prosperity.

He noted that oil at $60 per barrel was unaffordable to many countries. “At one time OPEC had talked of maintaining crude oil price in a band of $25-30 a barrel. This would be necessary for economic prosperity,” he said.

Ambani indicated that the company’s second refinery at Jamnagar was on schedule to start operations by end-2008.

“When in 1999 we started our first refinery, we had a (global) recession and when we are about to start our second refinery, history is repeating itself,” he said.

Jum’ah in his speech praised India’s focus on increasing its refining capacity, saying that it was the “right path”.