French Finance Minister Thierry Breton said on Friday that he and Britain’s Gordon Brown would make the trip on behalf of the G7 rich nations, who at a meeting in Washington cited high energy prices as a threat to a rosy economic picture.
A lack of quality information about oil supply was causing “speculative tensions” in prices, Breton said. The cost of oil has risen about 50% this year.
“We will go, (British Finance Minister) Gordon Brown and myself, to the major capitals of the oil-producing countries in the first half of October,” Breton told a news briefing after the G7 finance meeting on Friday.
“We will have a strong message,” he added. “The big consuming countries that we (the G7) are are now very aware, even worried about, the lack of visibility and predictability on the market … which is subject to speculative tensions.”
G7 members – European Bank
The Franco-British-led initiative is the latest move by the G7 to try to quell the rise in oil prices.
At their New York meeting in May 2004, the finance chiefs said in a statement: “Lower oil prices would benefit the world economy” and urged producers to provide enough supply “to ensure that world oil prices return to levels consistent with lasting global economic prosperity.”
But oil costs have risen relentlessly.
Surging world demand for oil and the G7’s limited leverage over supply makes it hard for the group to influence prices.
Reliance on imports
The G7 – the United States, Japan, Germany, Britain, Italy, France and Canada – relies on oil imports.
Canada and Britain are net exporters, but Britain’s dwindling reserves mean it is set to be a net importer by 2009 or 2010.
The G7 nations’ growing trepidation over the impact of oil on their economies and inflation rates led them to devote a good chunk of Friday’s final statement to the subject.
European Central Bank President Jean-Claude Trichet said the surge would have a very significant impact on euro zone growth over the next three years.
Brown sounded equally worried, saying on the sidelines of the G7 meeting: “The world is coming to terms with an oil shock as bad as in the 1970s.”
He told reporters UK economic growth would likely fall short of his 2005 budget forecast because of oil prices.
The 11-member Organisation of the Petroleum Exporting Countries (Opec) this past week offered up every last barrel of spare production in an attempt to reassure consumer countries about energy supply security, a move welcomed by Brown.
In the Friday statement, the G7 called for a “sustained increase in supply” from any country with oil to spare as well as spending to boost output and more conservation efforts.
Breton, whose government has faced protests in France over rises in gasoline prices, said oil-producing countries must invest in production or risk losing business.
“If this investment does not take place, it is obvious that we (the G7) will develop alternative energy forms far more quickly,” he said.
“We will talk to them (producer states) about ways to better anticipate (supply) and to have better visibility regarding data, which is fundamental to transparency in this market and which is not available today in top quality form.”