ISSUE 1857                                                                                Sunday 25 June 2000

                                         Sheikh Yamani predicts price crash
                                         as age of oil ends
                                         By Mary Fagan, Deputy City Editor

SHEIKH YAMANI, the former Saudi oil minister, has told The
                                         Telegraph that he expects a cataclysmic crash in the price of oil in
                                         the next five years.

                                         In an unprecedented personal interview, Sheikh Yamani also predicts
                                         that, within a few decades, vast reserves of oil will lie unwanted and
                                         the "oil age" will come to an end.

                                         In an interview with Gyles Brandreth, he says: "Thirty years from
                                         now there will be a huge amount of oil - and no buyers. Oil will be
                                         left in the ground. The Stone Age came to an end, not because we had
                                         a lack of stones, and the oil age will come to an end not because we
                                         have a lack of oil."

                                         Sheikh Yamani, who was Saudi Arabia's oil minister from 1962 to
                                         1986 and is now in charge of an energy consultancy, became the
                                         public face of the revolutionary oil policy that altered the balance of
                                         world power in the early Seventies.

                                         He predicts that a combination of recent oil discoveries, the advance
                                         of new technology, and heavy investment in exploration and
                                         production will all lead to a collapse in the price of crude. He says:
                                         "I have no illusion - I am positive there will be some time in the
                                         future a crash in the price of oil. I can tell you with a degree of
                                         confidence that after five years there will be a sharp drop in the price
                                         of oil."

                                         Fuel-cell motor technology - which can produce electricity by
                                         combining hydrogen from a variety of fuels with oxygen from the air
                                         - will have a dramatic impact on the oil market, he predicts. "This is
                                         coming before the end of the decade and will cut gasoline
                                         consumption by almost 100 per cent. Imagine a country like the
                                         United States, the largest consuming nation, where more than 50 per
                                         cent of their consumption is gasoline. If you eliminate that, what will
                                         happen?" Saudi Arabia, he says, "will have serious economic
                                         difficulties".

                                         His remarks follow last week's agreement by the Organisation of
                                         Petroleum Exporting Countries - in which Saudi Arabia is the
                                         dominant force - to a marginal rise in production of 708,000 barrels
                                         a day in response to mounting concern in the US and other major
                                         consuming countries over the high price of oil. Prices per barrel
                                         have been hovering at around $30, compared with $10 at the
                                         beginning of last year. But industry experts have given warning that
                                         Opec's latest production increase will not be enough to ease the
                                         price.

                                         In the interview, Sheikh Yamani forecasts that prices will stay high
                                         temporarily because of demand in the US and parts of Asia. But he
                                         argues that this price obscures the likely long-term effect of "huge"
                                         recent discoveries in regions such as the Caspian Sea, Yemen, Egypt
                                         and Africa. He also predicts that Iraq, which is capable of producing
                                         6.5 million barrels a day, will become a bigger supplier before long.

                                         He says: "On the supply side it is easy to find oil and produce it, and
                                         on the demand side there are so many new technologies, especially
                                         when it comes to automobiles." Yamani believes that automobile
                                         engine technologies including fuel cells - which can produce
                                         electricity by combining hydrogen from a variety of fuels with
                                         oxygen from the air - will drastically reduce oil consumption and
                                         that, in the longer term, no one will need oil.

                                         His views reflect those of many in the industry, although few would
                                         go so far as to predict an end to the use of oil. Vincent Cable, a
                                         former chief economist at Shell and now industry spokesman for the
                                         Liberal Democrats, said: "People in the industry would not be
                                         surprised by a vision of the future with relatively weak prices, but
                                         punctuated by occasional price shocks."