Solutions to high cost of importing oil lie at home
Weekend efforts by energy ministers from the world's biggest oil- producing and -consuming nations to determine why prices are rising and to formulate an action plan were not wholly satisfactory. They blamed the increases on speculators and one another at a meeting on Sunday, while agreeing to greater co-operation; only one country, the host, Saudi Arabia, pledged to boost output. Markets ignored their moves yesterday; the price of crude oil continued rising towards the record of US$139.89 per barrel, set last week.
Expectations should not have been high. Whatever is driving oil prices to levels double a year ago, nothing can be done immediately to force them down dramatically. Market forces are at play and the economics and politics driving them are complicated.
That was plain from the events on Sunday. Saudi Arabia said it would boost output by 200,000 barrels a day next month. At the same time it was revealed that attacks by militants on oil facilities in another major producing country, Nigeria, had reduced daily capacity there by 300,000 barrels. The threat of a military strike by the US or Israel against the world's fourth-biggest oil producer, Iran, is causing further jitters, as is instability in neighbouring Iraq.
Still, the talks were a success in that they brought together the 36 nations most involved in the oil dilemma. China's representative, Vice-President Xi Jinping , pointed out the importance of this, saying in his speech that co-operation among nations was the most effective way to reduce prices. But he also pointed to a wider solution, saying that, through science and technology, countries could evolve sustainable strategies. He dispelled the myth that demand from China and India was helping push up prices, pointing out that China sourced about 90 per cent of its energy requirements from within its borders. This, he rightly said, is what other governments should be aspiring to.
Dearer oil is pushing transport costs higher, causing food prices to rise. This affects poor people disproportionately. While it is up to countries to come up with national strategies, co-operation between governments can create the right environment for that to happen.
