Saudi Arabia and the global oil cartel it oversees haven’t declared war on shale or production by any country, but its members are doing what every other industry representative is doing, “responding to challenging market conditions and seeking the best possible outcome in a highly competitive environment,” the country’s oil minister said Tuesday morning at IHS CERAWeek.

Petroleum & Mineral Resources Minister Ali Al-Naimi addressed an overflow crowd in Houston, offering insight into why he thinks the energy industry is more united than divided, and why he thinks climate change poses a bigger existential threat.

“When oil was up around $100, the price seemed reasonable,” he said. “But historically, it was very high. That price also unleashed a wave of investment around the world into what had been previously uneconomic oil fields. This went from the Arctic, to Canadian oilsands, to Venezuela’s Orinoco tar sands, to deepwater frontiers. It also led to the development of shale oil resources in some parts of the U.S. This resulted in robust global growth of conventional and unconventional oil supplies. And the price started to fall.”

In November 2014, during a meeting of the Organization of the Petroleum Exporting Countries (OPEC), which Saudi Arabia oversees, “there was clamor” by many members to reduce production and arrest the price decline.

“But the oil market is much bigger than just OPEC,” Al-Naimi said. “We tried hard to bring everyone together, OPEC and non-OPEC, to seek consensus. But there was no appetite for sharing the burden. So we left it to the market as the most efficient way to rebalance supply and demand. It was — it is — a simple case of letting the market work…You can argue over small percentage falls or rises, but the bottom line is that the world demands, and gets, more than 90 million b/d of oil, and long-term this will increase, so I have no concerns about demand, and that’s why I welcome new, additional supplies, including shale oil.”

For the record, he said, “we have not declared war on shale or on production from any given country or company. We are doing what every other industry representative in this room is doing. We are responding to challenging market conditions and seeking the best possible outcome in a highly competitive environment.”

It will be efficient markets that determine where the cost curve on a marginal barrel of oil resides, Al-Naimi said. Producers of high-cost barrels “must find a way to lower their costs, borrow cash or liquidate. It sounds harsh, and unfortunately it is, but it is the most efficient way to rebalance markets. Cutting low-cost production to subsidize higher cost supplies only delays an inevitable reckoning.”

Reducing downward cycles and making the less extreme helps, which he said includes allowing “markets to work with a minimum of meddling. We are hopeful that the nimbleness and responsiveness demonstrated by shale oil producers will continue. These supplies may be needed quickly once markets balance and tighten.”

The petroleum minister said it was a positive that U.S. producers “are now able to freely export crude. We believe it will also help improve the efficiency and flexibility of the global market. For that’s what it is — global. We’re all in it together.”

The market today is unlike the 1980s because it’s much more sophisticated and complex, with many new players and financial instruments that didn’t exist 35 years ago, he said.

“Each oil market cycle comes with some uncharted territory. Even as the global oil market has become more efficient and dynamic over the past several decades, it continues to deliver surprises. Some are welcome, some are not. Volatility and overshooting — both at the top and bottom of the market — remain key challenges…We should allow markets to work, but we must also remain vigilant. We must seek to better understand changing market dynamics, and be ready to act when market failures and extreme volatility occur.”

Saudi Arabia’s oil policy in these challenging times is centered on a commitment to meet customer demand, Al-Naimi told the audience. It also invests to retain spare capacity to meet additional demand and to address global supply disruptions, which in the past included the oil shock in the aftermath of Hurricane Katrina in 2005.

The country also seeks stable oil markets, he said. “As such, we continue to communicate with all major producers in an effort to lessen volatility. We seek consensus and remain open to cooperative action. And lastly, we remain committed to supplying a large portion of the world’s energy demands on purely commercial terms. We’re not chasing a greater market share.”

One point that should unite all global fossil fuel energy producers, and which poses a “much greater existential challenge” than price movements, is the “threat posed by climate change,” he said.

Al-Naimi was in Paris last December for the United Nations Conference of Parties, or COP21, regarding climate change (see Daily GPI, Dec. 14, 2015).

“We have been involved in the discussions from the start and, for the record, we recognize the threat posed by climate change,” he said. “As such, we and many others have invested time, money and brainpower into seeking technological solutions to the challenges posed by climate change, in particular with carbon capture and storage. We are also investing in renewables and taking serious action to improve energy efficiency across our economy.

“But the widely accepted narrative that emerged from COP21 was that fossil fuels are harmful and, ultimately, they must be kept in the ground. Now, a disclaimer. I’m Saudi oil minister, yes, and I’m speaking to a room full of oil men and women, so of course I would say this. But I’m also a realist. And I am pragmatic.”

Fossil fuels “are good,” Al-Naimi told the crowd. “I am a big supporter of renewable energy, particularly wind and solar. For Saudi Arabia, and Texas, solar will be a great source of energy for future generations. But I believe a mix of sources is the best and most secure way forward. The problem is not fossil fuels themselves. The problem is the harmful emissions we get from burning coal, oil and gas. The answer is not to leave the world’s greatest, most plentiful and economic energy resource in the ground.”

The answer is to invest in technology to minimize and eradicate harmful emissions, he said. “Some don’t accept this view, but I have faith in technology. It is already happening on a small scale and, over the decades, the world has made progress, but much more work and collaboration is required.” He gave a shout out to U.S. Energy Secretary Ernest Moniz for his leadership in tackling these issues, “particularly his faith in the power of technology.”

Renewables alone won’t supply a growing global population, “and it is simply not fair for advanced nations to dictate what developing nations can or cannot do to meet their energy needs.” But many nations are built on energy from fossil fuels.

“As an industry, we should be celebrating that fact and better explaining the vital importance of these precious natural resources. We should not be apologizing. And we must not ignore the misguided campaign to ‘keep it in the ground’ and hope it will go away. For too long the oil industry has been portrayed as the ‘Dark Side,’ but it is not. It is a force, yes, but a force for good…

“This business is cyclical. We are in a painful downturn, but the market will rebalance and demand will pick up. I remain optimistic. We must continue to work together and we must stick together if we want to achieve our common goal of supplying energy for the betterment of the world and humankind.”