HISTORIC PRESS RELEASE : Chancellor Calls for Actions on Oil Prices [October 2004]

The press release issued by HM Treasury on 1 October 2004.

At this weekend’s meeting of G7 Finance Ministers the Chancellor of the Exchequer, the Rt Hon Gordon Brown MP, will propose new measures to bring stability to oil markets and help ensure high oil prices do not undermine global growth.

Speaking in advance of the G7 meeting, the Chancellor said:

“A global recovery is under way with growth stronger over the past year but it remains uneven and fragile. High and volatile oil prices pose a risk to the outlook, dampening consumer spending and company profitability. If high prices persist, the consequences could become more serious, denting confidence and pushing up inflationary pressures. I believe there are four steps that must be taken now to reduce this risk.

“First, that while OPEC has responded to earlier calls for action by increasing supplies, oil stocks remain low with only limited spare production capacity available. Oil prices, which reached record levels this week, remain high and volatile. So OPEC must continue to take the necessary action to return oil prices to levels consistent with global economic prosperity.

“Second, action must also be taken to improve the functioning of the oil market to ensure lower and more stable prices over the medium term. That is why, as a next step, I am calling for actions to improve the transparency and efficiency of the oil market. A lack of transparency in oil markets and poor quality information contributes to volatility and uncertainties. So today I am calling for renewed co-operation between oil producers, consumers and market participants to ensure oil market decisions are based on timely, reliable and transparent information. And I am also calling for an enhanced role for the IMF and World Bank, building on their experience with improving data and Codes and Standards, in encouraging better and more timely information.

“Third, more needs to be done to encourage the investment that is required to guarantee the stability of supply needed to maintain global growth, including from non-OPEC countries. So concerted action is needed by oil producing countries to promote sustainable investment in their reserves and productive capacity, consistent with their wider development goals. Oil producers also need to make more use of the Fund and World Bank’s expertise to improve their investment frameworks.

“Improving the broader investment climate, and establishing a clear, transparent and competitive oil investment framework will help insure future supplies match demand and support global growth, in the interests of all.

“Fourth, as IMF Managing Director Rodrigo Rato has said recently, all countries need to do more to promote greater energy efficiency and develop new sources of energy. That is why international co-operation on tackling climate change will be a key theme of our G8 presidency.