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Financial Times: G7 raises pressure on suppliers as oil tops $75

G7 raises pressure on suppliers as oil tops $75

 

By Chris Giles and Krishna Guha in Washington

Published: April 21 2006 19:05 | Last updated: April 22 2006 01:40

 

Finance ministers and central bank governors from the Group of Seven leading economies raised the pressure on oil producers to increase supplies after oil hit a new record of over $75 a barrel in New York on Friday. 

 

They called for further steps from producers to increase the transparency of their reserves and raise investment in exploration and refining capacity.

 

Gordon Brown, the UK finance minister, said: “When Opec meets on June 1 it must look at its production quotas and it must look at both how we can secure increases in output and increases in refining.”

 

The G7 ministers were set to press home their concerns at a dinner in Washington on Friday night attended by leading oil producers including Saudi Arabia, Russia and the United Arab Emirates.

 

They prepared a communique warning against a return to protectionism and urging all countries to redouble their efforts to make a successful conclusion to the Doha trade talks.

 

Ministers discussed strengthening their position on exchange rates to focus more explicit attention on the need for countries with large trade surpluses to let their currencies rise.

 

This has long been advocated by the US, which is keen to see China allow the renminbi to appreciate. But it has got fresh support from continental European countries, which want to see the yen rise as Japan emerges from a decade of stag- nation and deflation.

 

The G7 meeting followed a closed-door discussion, hosted by the International Monetary Fund, on the world’s gaping trade imbalances. This was attended by China, India and other top economies with seats on the IMF’s board as well as the G7.

 

Mr Brown said it was “absolutely essential” for the G7 to push for transparency in oil markets because market participants neither knew the level of reserves nor likely future supply and demand for oil. But other G7 officials stressed that incremental progress on the important global issues was all that could be expected from the meeting.

 

“Sometimes baby steps are necessary,” he said, stressing the value of developing a common understanding of the causes of global imbalances. But he added on oil: “It is fair to say that there is not a lot that the G7 can do.”

 

Oil-producing countries have sent mixed signals regarding their positions on increasing output, with Iran taking a hard line.

 

The G7 also discussed the importance of pushing ahead at today’s meeting of the IMF’s governing body with reforms to make the organisation more relevant to today’s economic problems and the rise of Asia.

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