FM asks oil producers to step up output to soften prices

Jeddah, June 24 (PTI) - With oil prices playing havoc with
the economy, India has said crude prices could soften only if
oil producers increase the supply and the concerned nations
regulate speculative trading in crude.

Before leaving for New Delhi, Finance Minister P.
Chidambaram told news channel NDTV that crude oil prices are
not under India's control and the prices would cool down only
if producing countries step up the output and the countries
concerned regulate over-the-counter trade or futures trading
in oil.

"In August 2007, it (crude prices) was 70 dollars a barrel
and a few days ago it has touched 140 dollars a barrel...
Those are not under India's control... So we have urged
producing countries to increase supply. We have urged
countries where these financial transactions are taking place
to step in and regulate these transactions," he said.

At the Energy Ministers' meeting here, Chidambaram had
yesterday blamed speculators for the surge in global crude
prices and said that this is threatening to 'wipe out'
economic gains of developing countries.

Rejecting suggestions that rising demand was leading to
spurt in crude prices, he said: "The causes for the current
pandemonium in oil prices lie... in unregulated over-the-
counter markets and future trading in oil" and urged nations
to wrest control of oil trading from the hands of speculators.

Wondering how oil prices have doubled from 70 dzollars a
barrel from August 2007, Chidambaram said: "There is ample
evidence that large financial institutions, pension funds,
hedge funds etc have channelised billions of dollars -- nay,
trillion of dollars -- into commodity investments and
commodity derivatives."

It is common knowledge that these financial transactions
are unregulated and highly opaque, the Finance Minister, who
accompanied Petroleum Minister Murli Deora to the meeting,
said, adding that the demand for oil generated by these funds
is purely speculative.

The surge in global oil prices had prompted India to
increase fuel prices early this month that caused inflation to
surge to a 13-year high of 11.05 percent in India.

"Three weeks ago, India passed on barely nine per cent of
the required price increase to the consumers: The result is
that the inflation measured by wholesale prices has crossed 11
per cent," he said, adding that even oil producers like
Russia, Saudi Arabia and Venezuela faced high inflation rates.

He warned the oil producing nations that "if the global
economy slows down or slips into a recession due to high oil
prices, that will eventually hurt all of us... We firmly
believe that the current level of international oil prices is
in the interest of neither oil producing countries nor the
consuming countries." PTI