The Hindu Business Line : G-7 finance chiefs discuss oil price rise

AGAINST the backdrop of continuing rise in oil prices and Wall Street taking a beating last week, plunging to new lows for 2005, the Finance chiefs of the Group of Seven industrialised nations focused on the energy sector as they gathered for the Spring Meetings of the International Monetary Fund and the World Bank.

The various statements of the Group of Seven spoke of economic growth remaining robust through 2005 but there were no illusions on the impact of the rise in oil prices and market volatility on economic growth.

"I think we recognise the volatility of oil prices and particularly the high level in recent months could have a damaging effect on growth," said Britain's Finance Minister and Chair of the International Monetary and Financial Committee, Mr Gordon Brown.

The energy situation is said to have dominated the discussion at the G-7 and the IMFC meetings.

Although the G-7 and the IMFC have welcomed efforts by producing countries to increase production and have called for conserving energy, the urgency of the matter was not lost especially on the kind of ramifications it had for oil importing developing nations.

In his remarks to the IMFC as a lead speaker, the Finance Minister, Mr P. Chidambaram, spoke of the high level of oil prices, the possibilities of further increases, and the strain this has placed on the performance of many developing economies - particularly the oil importing ones.

"The burden of high oil prices has, however, fallen disproportionately on the developing countries. In India, for example, the average price of the Indian basket of imported oil was $28 in 2003-04; it increased to $39 in 2004-05 and so far in 2005-06, it has been ruling at $52 per barrel. I need hardly emphasise the need for moderation and stability in oil prices," he told the policy making committee of the Fund.

Officials of the G-7, the Fund and the World Bank gathered for the Spring session at a time when Wall Street saw its worst session in two years.

Worried about oil prices and a softening economy, the Dow Jones Industrials plunged 191 points last Friday.

"I don't comment on stock market moves. What I do comment on is underlying fundamentals, and the underlying fundamentals remain strong," said the US Treasury Secretary, Mr John Snow, following a meeting of the G-7.

He conceded that the high energy prices "hurt," but was keen on keeping the accent on the positive.

"Does productivity remain high? It does ... Is inflation rearing its head? No ... Is capital spending strong? Yes. Are jobs being created? Of course jobs are being created," Mr Snow said.

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