New Delhi, Jun 22 (UNI) Expressing concern over spiralling oil prices and surging inflation which are wiping out the economic growth of the emerging nations like India, Finance Minister P Chidambaram today urged the OPEC countries to wrest control over oil trading from the hands of the speculators.
Calling the irrational escalation in oil prices the cause of diversion of scarce resources from education, health and other social sector schemes, Mr Chidambaram said the time has come for producers -- especiallly OPEC -- and consumers to wrest control over oil trading from the hands of the speculators.
Suggesting some of the steps to control the rising oil prices at the Energy Ministers' Meeting in Jeddah in Saudi Arabia, he said there is a need for the oil industry to re-assert its leadership in price formation and not remain passive spectator of speculation and paper trading in oil.
The global hydrocarbon community must address this situation through appropriate supply side responses and calm the oil markets, the Minister added.
Currently, the vulnerability of the supply chain to temporary supply disruptions stands exposed, he said.
The global oil consumption grew by 1.1 per cent or 10,00,000 barrels per day during the last year, whereas the global oil production fell by 1,30,000 barrels per day.
''Spare capacity across the supply chain has dwindled considerably which has increased risks and uncertainty. Hence, there is a need to fast-track development of oil resources,'' the Finance Minister said.
According to the International Energy Agency (IEA), India's future oil and gas needs call for massive investments of the order of 10 trillion dollars by 2030.
''Such fund mobilisation can be achieved,'' he said.
Refuting the speculation that fresh investments are not materialisating, Mr Chidambaram said the cyclical behaviour of oil markets is amply established and oil production provides attractive returns in the long run.
High oil prices have improved the balance sheets of oil-producing nations and companies. It would be reasonable, therefore, to expect oil producers to fund capacity expansion, he said.
The Indian government recently raised prices of petrol by Rs five a litre, diesel by Rs three a litre and domestic LPG by Rs 50 per cylinder to offset the rising under-recoveries of the oil marketing companies.
Rejecting the suggestion that rising demand is the cause of spiralling oil prices, the Minister said, ''demand and supply dynamics cannot explain what has happened over the last 12 months.
The causes for the current pandemonium in oil prices lie elsewhere -- in unregulated over-the -counter markets and futures trading in oil.'' Proposing adoption of Price Band Mechanism with a view to shelter the world from volatility and unpredictability in oil prices, Mr Chidambaram said, ''consuming countries must guarantee that oil must guarantee that oil prices will not rise avove a guaranteed level. In the band between these two levels, let prices be determined by market forces.'' ''If the global economy slows down or slips into a recession due tohigh oil prices, that will eventually hurt all of us. Therefore, in our enlightened self-interest, we must take concerted action to address the present situation,'' he asserted.
The high oil prices have caused inflation to mount to a record 13 year high at 11.05 per cent for the week ended June 7.
Asian countries account for about 40 per cent of recent growth in global oil consumption.
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