2670G7 Worried about Price of Oil
- Oct 2, 2004Maybe they could ask the U.S. to stop subsidizing Hummer Purchases?
G7 worried about oil, but has little power: analysts
Sat Oct 2,12:56 PM ET U.S. National - AFP
WASHINGTON, (AFP) - Group of Seven leaders are worried about high
oil prices derailing the global economy, but have little means to
influence the marketplace, analysts say.
G7 finance ministers and central bankers, in a statement following
talks Friday, suggested that oil prices -- which closed above 50
dollars for the first time Friday -- appear to be the main risk to
an otherwise strong global economy.
"Oil prices remain high and are a risk," the G7 said. "We call on
oil producers to provide adequate supplies to ensure that prices
"Right now, oil prices are causing an economic headwind," said US
Treasury Secretary John Snow after the G7 talks.
"The geopolitics of oil, and current uncertainties, are causing a
short-term phenomenon. The finance ministers and I are committed to
promoting policy reforms in each of our countries to speed the
return of more reasonable costs."
But analysts said most of the factors are beyond the control of the
G7, which represents the seven richest industrial countries.
"The problem is that oil markets are tight as a drum and demand is
growing faster than supply," said Nariman Behravesh, chief economist
at the economic research firm Global Insight.
"It's not as if OPEC (news - web sites) is manipulating the market.
There's really not much anybody can do until the investments now
being made bring some fruit."
Behravesh said the G7 is concerned, however: "If oil prices stay at
this level or move higher it could derail the global economy."
Joseph Quinlan, economist at Bank of America, said it would be a
stretch to think the G7 can "jawbone" the oil markets.
"I think the oil market will change when global growth slows," he
"The G7 can be effective in currency markets but they have no real
history in the oil markets."
Behravesh agreed, but said the G7 nonetheless wanted to express its
concern about a major risk to global economic growth.
"Clearly they're worried, and I think this reflects a worry about
how much oil prices will affect growth. But it's not that the G7 has
much influence. They don't."
In an effort to show a balanced view, the G7 statement also called
on consumer nations to increase energy efficiency and called for
more transparence in global markets by getting more information
about supply and demand, principally through the International
The statement came after New York crude oil futures closed at their
highest level ever.
The light sweet crude November futures contract on the New York
Mercantile Exchange closed up 48 cents at 50.12 dollars a barrel,
posting a record close, on the latest Nigerian worries.
In London, the price of reference Brent North Sea crude oil for
delivery in November rose 24 cents to close up at 46.62 dollars a
Marshall Steeves, analyst at Refco, said high oil prices affect many
countries, not just the G7.
"Western economies like the US and the EU might not be as sensitive
because they are not energy intensive anymore," he said.
"In Asia it might have a stronger impact, in particular in China and
India, which have become more manufacturing-based economies."