G8--Oil:
G8 energy ministers to seek remedies to oil price headache
Tokyo (Platts)--4Jun2008
Energy ministers from the world's richest countries and biggest oil
consumers are due to meet at the end of this week in Japan, hoping to find
some answers to the mounting economic and political problems caused by this
year's unprecedented oil prices.
The cause of the record oil price and how to deal with it look set to
dominate the agenda of the meeting of the ministers from the Group of Eight
countries as well as China, South Korea and India, who together account for
nearly two-thirds of global oil consumption.
The ministers intend to issue "strong messages" on soaring crude prices
when they meet June 7-8, government officials from host country Japan said
this week.
Japan's Minister of Economy, Trade and Industry, Akira Amari, Monday
described current oil prices as "outrageous," adding that they had also pushed
up prices for other energy resources and food and caused distortions in the
world economy.
Issues such as energy conservation, climate change and energy security
will also be on the agenda, but the issue of high oil prices will be
unavoidable, not just at this weekend's talks but also when G8 heads of state
gather for their July 7-9 summit.
HIGH PRICES CAUSING PROBLEMS
Oil prices more than doubled between the start of 2007 and May 2008,
slowing growth and fueling inflation in the US and Europe, as well as
inflicting a growing burden on countries like India which subsidize retail
fuel prices.
G8 members France and the UK have seen protests against high fuel prices
in recent weeks, and both have said they would like the G8 to put pressure on
oil-producing countries to raise production.
"We cannot forever be in a market system in which the price is
permanently on the rise, to the benefit of producers, who are building up
major oil revenues," French Finance Minister Christine Lagarde said May 27.
Britain's Prime Minister Gordon Brown, who has said the world is
currently experiencing the third oil price shock, wants the G8 to agree a
common strategy for dealing with high prices.
So far, however, the signs are that any outright plea for more oil is
likely to fall on deaf ears.
In May Saudi Arabia, OPEC's biggest producer and the only country in the
world with any significant spare capacity, said it had unilaterally raised its
own supply to the market by 300,000 b/d.
The Saudi move had little impact on prices, however, and last week a
senior OPEC official said he saw no need for the cartel to raise production
again this year.
FISCAL POSSIBILITIES
With little sign of a supply-side cure for record prices, some consumers
are considering fiscal solutions.
France has raised the prospect of suspending value added taxes on oil
sales, an idea which has so far found little support from its European
partners.
Italy, another G8 member, has floated the idea of levying a special
"windfall" tax on oil companies and using the money to help those hit hardest
by the rise in prices, although this is more likely to discussed by EU leaders
at a June 19-20 summit in Brussels than at the talks in Japan.
Most consumer governments have said they believe that fundamental
supply/demand factors have been the main cause of the surge in oil prices,
particularly the rapid growth of demand in countries like China and India in
recent years.
Nonetheless, the role of market speculators is also coming into the
spotlight and is also likely to be discussed.
The US Commodity Futures Trading Commission May 30 disclosed that it had
launched a wide-ranging investigation into crude markets, and Japan's Amari
said this week that prices "seem to be pushed up by the flood of [investment]
funds going into futures markets."
This week's talks will be the first time G8 energy ministers have met
since gathering in Russia ahead of the St Petersburg summit in July 2006.
Energy ministers from China, India and South Korea have held talks with
the US and Japan before but not with the full G8.
--Takeo Kumagai, takeo_kumagai@platts.com
--Richard Swann, richard_swann@platts.com |
