G-7 nations demand OPEC cut oil prices

Posted in Other | 24-May-04 | Author: Edmund Andrews| Source: International Herald Tribune

Blunt statement cites the need for 'lasting economic prosperity'

NEW YORK Finance ministers from the United States and other major industrialized countries, hoping to affect the outcome of a battle within the Organization of Petroleum Exporting Countries, formally demanded Sunday that oil-exporting countries raise production and lower prices to a level "that is consistent with lasting economic prosperity."

The unusually blunt demand, issued at the close of a Group of 7 meeting here, came one day after several oil-exporting countries sharply criticized Saudi Arabia's unilateral decision to increase its own production and its proposal for the oil-exporting cartel to increase its overall output by two million barrels a day.

In their statement, the United States, Britain, Canada, France, Germany, Italy and Japan, the members of the organization representing the largest industrialized countries in the world, said they welcomed the decision by "some oil producers" to raise their production - an indirect reference to Saudi Arabia.

But they cautioned that high oil prices - which reached $41 a barrel last week, before receding to $39.93 after Saudi Arabia's announcement on Friday - were a risk to an otherwise robust global economy.

"We call on all oil producers to take action to ensure that world oil prices return to a level that is consistent with lasting economic prosperity and stability, particularly for developing countries," said Gordon Brown, the chancellor of the Exchequer, quoting from the G-7 declaration shortly before it was officially released.

"It is a strong statement," said Caio Koch-Weser, the German deputy finance minister, adding that the seven industrialized countries were in broad agreement about the message they wanted to send.

The last time the G-7 tried to press oil-exporting countries was in 2000, when oil prices were climbing above $30 a barrel and gasoline prices in the United States were approaching $2 a gallon in some states. But that effort, led by the United States, was only partially successful and provoked considerable resentment among some nations.

OPEC ministers, attending a conference of oil-producing and consuming countries that took place this weekend in Amsterdam, decided to put off any decision on the cartel's overall production levels until June 3. But Saudi Arabia is the only member of the group that has substantial excess capacity, and its decision to raise output on its own angered some of the group's other members.

The Venezuelan energy minister, Rafael Ramírez, called Saudi Arabia's proposal to increase OPEC's overall quota from 23 million to 25 million barrels a day a "unilateral position" that did not necessarily reflect the entire group's views, Reuters reported from Amsterdam.

Libya's oil minister said Saudi Arabia had no right to increase production on its own and called its decision "a mistake."

"We now call on all oil producers to provide adequate supplies to ensure that world oil prices return to levels consistent with lasting global economic prosperity and stability, in particular for the poorest developing countries."

The Group of 7 ministers sought to instill confidence in the world economy in the statement, which sets the agenda for a summit of leaders of the Group of Eight - the G-7 along with Russia - in the U.S. state of Georgia from June 8-10.

"The summit is taking place at a time when the world economy is strong," they said in the communiqué.

"The recovery is proceeding rapidly, with global growth of around 4.25 percent in 2003-04, the best growth rate in the world economy in the past 15 years," the ministers said.

"Yet risks to the outlook remain," they added.