Time to convene a summit on oil: Financial Times
KARACHI (May 17 2008): World's leading financial daily Financial Times has strongly advocated the convening of a summit on oil to achieving a joint response to the situation caused by the rise in the oil price, from below $20 to near $128 in less than a decade.
In its editorial comment titled "Time to convene a summit on oil", the newspaper says that the inexorable rise in the price of commodity makes governments look powerless. But governments can ease the economic harm of a high oil price if they act together.
"In order to do so they should put oil at the heart of the next Group of Eight summit, or even better, organise a wider summit to bring together industrialised countries, big emerging market oil consumers and large oil producers," the newspaper suggests.
According to the daily, a summit would have three objectives: to encourage energy efficiency, and so reduce future oil demand; to promote investment in new oil supplies; and to smooth the recycling of billions of dollars in oil revenues from producers back into consuming countries.
All three tasks would be easier with international co-operation and there are enough shared interests to make a worthwhile deal possible. "The big emerging markets could constrain demand by passing through higher oil prices to factories and motorists, rather than increasing subsidies on fuel, as well as tightening their fuel economy standards.
To do so is in their interests - fuel subsidies strain the budget in countries such as Indonesia - and an international agreement could provide political cover for an unpopular policy," the newspaper says. The newspaper argues that oil producers such as Saudi Arabia may have little interest in reducing demand, but they also have something to gain: oil price stability.
An even higher oil price followed by a crash is the last thing an exporter needs. Another carrot could be lower biofuel subsidies in the US and Europe, or at least clarity about how much biofuel will be mixed with gasoline in future.
The greatest contribution oil exporters could make is to invest more in new production, the newspaper says and adds that the oil price is creating financial dislocation, as trade surpluses rise for exporters and deficits rise for importers.
"The final topic for a summit could be how to make sure that this imbalance does not cause a currency crisis. A summit would not cause instant falls in the price of oil, but a joint response will achieve more than countries acting alone," according to the newspaper.
Commenting on FT proposal, a senior energy expert told Business Recorder that from Pakistan's perspective, any measure to reduce oil demand, and a recycling of petrodollar through investments in developing countries to provide budgetary support and help their balance of payment, would be most welcome. "The summit proposed by the newspaper should also ensure participation of countries such as Pakistan, Bangladesh and Philippines," he said.
Business Recorder [Pakistan's First Financial Daily]
