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G7 to call on OPEC to pump more oil
(Agencies)
Updated: 2004-05-23 15:04
The Group of Seven top economic powers are set this weekend to call on
oil-producing nations to lower sky-high energy prices by pumping more crude.
U.S. Treasury
Secretary John Snow exits a meeting at a New York hotel May 22, 2004. G7
finance officials meeting in New York are worried record oil prices will
dent the rosiest economic outlook in years by hitting business and
consumers and stoking inflation. [Reuters] | Europe and Japan get all the hot new technology first. Here's a look at the
pipeline of future tech -- plus some gadgets that didn't travel well and a
wishlist of cool things.
G7 finance officials meeting in New York are worried record oil prices --
which earlier this month topped US$40 a barrel for the first time -- will dent the
rosiest economic outlook in years by hitting business and consumers and stoking
inflation.
"The (G7) statement will invite OPEC countries to
increase their oil production and will contain an appreciation of Saudi Arabia's
position on increasing its production," a G7 source told Reuters Saturday.
Members of the Organization of Petroleum Exporting Countries, who met
earlier in Amsterdam, deferred any decision on upping output to a meeting in
Beirut on June 3 but said the cartel wanted to cut fuel costs to support the
world economy.
Saudi Arabia is pushing for an OPEC output hike of up to 2.5 million
barrels a day and has pledged to pump more oil itself in any event.
"What I am thinking is that OPEC increase between 2.3-2.5 million barrels
a day and this will give us a kind of credibility," Saudi Oil Minister Ali
al-Naimi told Sunday's edition of the Arabic-language daily al-Hayat.
G7, meantime, wants OPEC to honor a long-term commitment to stabilize oil
prices between US$22 and US$28 per barrel.
U.S. Treasury Secretary John Snow Friday welcomed Saudi Arabia's plan and
said he would back a G7 call for an OPEC-wide pledge. Britain's Gordon Brown,
Germany's Hans Eichel and France's Nicolas Sarkozy had earlier penned a joint
statement to that effect too.
Canada's Ralph Goodale, who opted out of the G7 meeting because of
election commitments at home, also gave support.
He called Snow and Brown, and the three agreed the G7 should be "pressing
for appropriate increases in global (oil) production to help moderate the global
economy," a spokesman said Saturday.
Japan echoed the concern. Finance Minister Sadakazu Tanigaki said oil was
not debated at Saturday's dinner but would be dealt with at Sunday's gathering:
"It (the high oil price) is something that needs to be watched closely."
The precise wording of any statement is still to be decided, several
officials said. The Group is conscious of not making specific demands or setting
ultimatums, they said.
"The G7 don't give orders, they just give indications. Usually these
indications are followed," Italy's Finance Minister Giulio Tremonti told
reporters Saturday.
WALDORF ACCORD?
Finance ministers from five of the G7 -- the United States, Japan,
Germany, Britain, France, Italy, and Canada -- are meeting Saturday and Sunday
at the Waldorf-Astoria, a landmark art deco hotel on New York's fabled Park
Avenue.
The ministers will discuss the outlook for global growth, structural
economic reforms, stalled trade talks, Iraqi debt and a review of Bretton Woods
institutions -- preparing the economic agenda for a June 8-10 summit on Sea
Island, Georgia.
Germany's Eichel is another absentee from the meeting but both he and
Goodale have sent high-level representatives. Russia also sends a delegation as
part of preparations for the G8 summit, where it has a seat at the top table.
The officials held a short meeting Saturday evening at the hotel followed by
dinner at New York City Mayor Michael Bloomberg's private residence, a luxury
townhouse on the East Side of Manhattan.
The G7 finance chiefs and central bankers discussed rising oil prices at
their Washington meeting last month, but while their joint communique gave a nod
to concern about energy costs, it did not include any language on OPEC
production.
Some OPEC members and many private economists argue that recent oil prices
are a result of refining capacity constraints, market speculation and roaring
economic growth rather than collars on crude output.
While higher output might help to stabilize the situation, they argue, it
would not necessarily lower prices.
"G7 is even more impotent than OPEC is at this stage in an attempt to keep a
lid on the market," said Nauman Barakat, senior vice president at brokerage
Refco in New York.
"The longer-term major factor is the significant increase in demand. That was
a major catalyst," Nauman added. "And the very unstable geopolitical
environment."
The overall impact of higher energy costs on the world economy is expected to
be limited. Rules of thumb suggest it will shave less than half a percentage
point off global gross domestic product, now expanding at about 4.5 percent a
year.
And some at Saturday's meeting were keen to defuse a sense of imminent crisis
from high oil prices.
"I think that for the moment one doesn't have
to fear serious consequences," said European Union Economic and Monetary Affairs
Commissioner Joaquin Almunia.
But G7 concern appears twofold. It is worried the impact on demand and output
in its slowest economies -- the euro zone in particular -- could exaggerate an
already uneven pace of expansion and global current account imbalances.
Conversely, the impact of pricier oil on the faster
growing economies like the United States and Britain could exacerbate inflation
pressures, forcing up interest rates.
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