United States Energy Secretary Sam Bodman called on Saturday for more countries to scrap fuel price subsidies that stoke oil demand, adding that more regulation of energy markets was not the solution to record prices.
Bodman’s comments came just ahead of his meeting with top energy officials of Japan, South Korea, India and China, the latter two of which have failed to raise domestic gasoline and diesel prices fast enough to keep up with roaring global markets.
It is part of a broader Group of Eight energy gathering that comes one day after oil’s over $10 surge to an all-time high above $139 a barrel, the biggest one-day gain on record.
”It’s a shock, but if you look at the rate of oil production globally, it has been 85-million barrels a day for three years in a row,” Bodman told a group of reporters.
”We know demand is increasing because a lot of nations are still subsidising oil, which ought to stop,” he said.
But he steered away from greater regulation, despite pressure from US lawmakers to step up oversight of energy markets in the hopes of detering the flood of new investors and speculators that some blame for inflating food and fuel prices.
”We’ve looked at it and have concluded unfortunately that this is not a matter where there needs to be more regulation of markets,” he said.
The US Commodity Futures Trading Commission will meet with international regulators in Washington next week, just weeks after it announced a slew of measures to increase surveillance of energy and other commodity markets.
Bodman also stopped short of calling on Opec to pump more crude, but said producers should allow for greater investment, while consumer countries need to help rein in demand by passing on the full burden of world prices that have doubled in a year.
India raised domestic fuel prices by about 10% this week, provoking a muted public backlash and threatening to stoke inflation to a 13-year high with only its second increase in two years. China has raised pump rates only once since mid-2006 due to inflation worries, increasing them by 10% in November.
But both measures leave prices lagging well behind oil’s rally, and analysts say the measures will do little to slow demand from two of the world’s fastest-growing major consumers until they allow rates to rise more quickly.
”… Because consumers are not paying the high prices … they don’t change their habits,” he said of artificially low fuel prices.
Oil’s Friday jump doubled the previous one-day record, set just the day before, and extends a six-year bull run that has seen prices rise seven-fold since 2001 as investors and speculators see producers struggling to keep up with demand.
Bodman said that without an increase in production, it would be hard to mitigate the volatility in oil prices.
”It’s very skewed, and it’s going to add to volatility as it did yesterday and will presumably continue to do in the future,” he said.
The two-day meeting of Group of Eight energy ministers comes at a time of growing public discontent over their governments’ failure to soften the blow of record energy costs. – Reuters 2008