GLOBAL – Sheikh Ahmed Zaki Yamani, former Saudi Arabian oil minister and one of the architects of the OPEC oil cartel, has highlighted the role of institutional investors in the current high oil price environment.

“The non-commercials, as we call them, speculate and make a really sizeable profit which they can’t get elsewhere,” Yamani said in a lecture organised by the Continuing Professional Development Foundation at the Royal Institution yesterday.

The oil price was not a reflection of the real price, he argued – adding that non-commercial interests such as “hedge funds, insurance companies and so on” were making “hundreds of millions of dollars”.

Industry participants say that non-commercials accounted for around 20% of the oil market when the price started to surge – although that figure is now thought to be below 10%.

Yamani was minister for petroleum and mineral resources of Saudi Arabia from 1962 to 1986 and first secretary general of the Organization of Petroleum Exporting Countries.

Yamani said factors likely to influence the oil price in the short term included the severity of the US winter and this week’s OPEC meeting in Cairo.

But in the medium term the situation in the Middle East would be key, he said. He was worried about the US attacking Iran.

“If you follow the news you know there is something cooking,” he said. “The real ‘doors of hell’ will be if they attack Iran. If that happens, God help us.”

He saw Iraq’s “disintegration” affecting supply in the coming year - adding that the prospect of a stable, democratic Iraq was “beautiful wishful thinking”. Given the current situation in Iraq, he said: “If there is a civil war there then forget about Iraqi crude.”

Over the mid-term, prices would be affected by the world economy. Although the impact of the current oil price couldn’t be compared to the 1970s oil shock, Yamani still saw a delayed impact of current prices on the US economy and possibly higher inflation and interest rates.

The US budget deficit, he said, was “like a cancer spreading” – with the US importing capital from Asia to fund the deficit. He compared the US today with the British Empire, which he said exported capital.

Over the long-term, Yamani argued that “technology is against the oil producers”. He cited improvements in production techniques as well as the resurgence of nuclear fuel and alternative energy.

On the wider situation in the Gulf states, Yamani stated that stability in the region would only come through democracy. But dignity for individuals was “a mirage in our part of the world”.

On the wider situation and the rise of militant Islam, he said: “This slogan ‘war on terror’ – I can’t buy it. You cannot fight ideology with a gun.”