MercoPress. South Atlantic News Agency

Oil supply and market efficiency in G7 agenda

The Group of Seven most industrialized countries, G7, will be discussing Friday and over the weekend supply and oil market efficiency revealed Tim Adams, United States Treasury Under Secretary for International Affairs.

Finance ministers and Central Bank governors from G7 (Germany, Canada, United States, Great Britain, France, Italy and Japan) will also be addressing global imbalances and United States is expected to reiterate its commitment to reduce the federal budget deficit.

"I hope ministers will discuss different measures to address the problem of oil supply and market efficiency", said Mr. Adams of the meeting that will be hosted by US Treasury Secretary John Snow.

"Energy supply disruptions that raise prices put a damper on growth. I expect Ministers and Governors will discuss steps taken to address supply and efficiency issues, as well as technical measures such as the improvement of data availability", said Mr. Adams who emphasized that higher oil prices are also causing problems for some emerging markets, particularly those that control domestic prices at low levels.

In an interview with the Paris newspaper Le Figaro, European Union Central Bank president Jean Claude Trichet said G 7 countries must examine "what is convenient to address collectively" faced with the rocketing of oil prices which has become "a most serious risk" for the global economy.

Further on Mr. Adams insisted that the U.S. has no current account target and "will not set one. Nor will we slow growth simply to correct external imbalances. What is needed is not less growth in the U.S., but more engines of growth from more countries and new reforms to appreciably boost potential growth rates".

Meantime eight United States Democrat governors requested President George Bush and Congressional leaders to begin an investigation into possible manipulation of gasoline prices following the Katrina hurricane.

In a letter the governors from Oregon, Wisconsin, Michigan, Illinois, New Mexico, Iowa, Montana and Washington request US leaders to look into the "excessive profits of oil corporations that are taking advantage of a national crisis", and demanded reimbursement for stripped consumers.

The letter quotes on a paper from Wisconsin University economist, Don Nichols, who argues that Katrina was not the only cause for the stampede of fuel prices at the pump.

According to Nichols the difference between a gallon of crude and one of gasoline has been historically between 85 and 90 cents, including refining and distribution costs plus taxes.

Following on this if the price of gasoline in the pump is 3 US dollars per gallon the price of crude should be 95 US dollars the barrel, when prices actually averaged 65 US dollars.

"The disconnection between gasoline and crude prices is enormous", said Mr. Nichols.

But Ed Murphy from the American Petroleum Institute indicated that refining capacity before Katrina was limited and the storm "made things worse damaging several refineries". This forced an increase in oil prices, which "is obvious".

White House spokesperson Allen Abney said President Bush had not seen the governors' letter but early this week gave instructions to Secretary of Justice Alberto Gonzales to address any claims of oil prices manipulation.

Last week the US Senate approved a bill demanding the Federal Trade Commission to investigate allegations of fuel prices manipulation.