Barcelona (Platts)--16Jun2008

Volatile oil prices are creating "troubling times" for the European power
sector, EU energy commissioner Andris Piebalgs said Monday.

"Oil is the starting point for gas prices, and that brings us...to the
electricity price," he told Eurelectric's annual conference in Barcelona.

High oil prices such as $130 to $150/barrel were only part of the
problem, he said.

"The problem is volatility...We couldn't predict even a couple of months
ago that oil prices would go so high, because the fundamentals between supply
and demand didn't indicate it," he said.

"Then we blamed speculation or looked for some other scapegoat, but
basically we are living when supply and demand are very tight," he said.

Piebalgs saw two ways to try to tackle this volatility: an end to quotas
for oil producers and for consumers to be much more energy efficient.

"Price volatility will always be the biggest enemy of providing
sustainable energy supplies," he said, because of the difficulty in bringing
on the long-term investment needed.

Piebalgs said that the meeting of major oil producers and consumers due
to take place in the Saudi city of Jeddah June 22 to discuss oil market
fundamentals and prices would be "extremely important."
--Siobhan Hall, siobhan_hall@platts.com