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Oil Market Should Be Stabilized
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The international oil prices continue to soar. On April 21, the New York Stock Exchange reported that the price of light crude oil exceeded US$75 per barrel, reaching US$75.15. On 24th, the price went up to US$75.35, set a new record for the fifth time within one week. The soaring oil price not only caused great concern from the international community, but also became a hot topic in many important international conferences.

The Meeting of G-7 Finance Ministers and Governors of Central Banks was held on the 21st, which issued a statement on the rapid rise in oil prices, expressing concern about the issue, urging energy organs to increase investment in oil exploration, production, energy infrastructure and refining capacity, and, calling on all states to continue to improve energy efficiency and energy diversification. The statement also called for increasing the cooperation between oil producing and consuming countries, disclosing in a more timely and comprehensive way the statistics of oil production, consumption and stock data, and enhancing the transparency of the oil market.

At the Boao Forum for Asia held in China's Hainan province on April 22nd, the delegates gave an in-depth analysis and discussion on the international energy market trends. They believe that the current oil prices are well beyond their actual value and need to be controlled. Energy is the engine of the world economic growth as well as one of the key factors to sustainable development. To resolve the energy security issues, in addition to strengthening oil exploration measures, governments of different countries should attach importance to energy saving so as to achieve a sustainable energy development in the future.

The International Energy Forum which closed on 24th has the theme as "The future energy security is a shared responsibility." The Ministers of Energy from 55 countries generally agree that given the volatility of the international oil market recently, oil producing and consuming countries should strengthen the constructive dialogue in search for a balance of supply and demand, and establishing an energy security mechanism, so as to restore the stability of the oil market and achieve a win-win objective.

Due to the unprecedented high oil prices in the market, all the three important conferences took oil issues as their main agenda. It is worrisome that the surge in oil prices has basically divorced from the economic track. The Ministers of Energy who participated in the International Energy Forum believe that the shortage of oil supply does not exist; the geopolitical tension is the real reason for the soaring price. At the moment, the United States and Iran are in a conflict on Iranian nuclear issue, which made the oil supply become the biggest bet. This is the direct cause to pushing up oil prices. It was predicted that if the United States and Iran had a clash in the Strait of Hormuz, the throat of the Persian Gulf, it will trigger an oil supply crisis. Furthermore, Iraq's political mire and the speculation in the international energy market also added fuel to the flame.

Relevant experts believe that despite a slight drop in oil prices over the past few days, the "turning point" has not appeared yet. IMF Managing Director Rodrigo de Rato warned that the high oil price is still a major risk for the global economic growth. Although the world economy has been strengthened in terms of resistance capacity, the endless rise in oil prices is likely to exacerbate global economic imbalances, thereby increasing the possibility of the outbreak of financial crises.

US President George W. Bush has ordered the suspension of additional US strategic oil reserve on 25th to curb price increases. Earlier, OPEC President Edmund Daukoru also said that OPEC should increase its crude oil surplus production capacity in order to stabilize the market and oil prices. However, these efforts may not be able to get to the root. To restore the oil price to a reasonable level, efforts should be made to eliminate the non-market incentives, search for a peaceful solution to the Iranian nuclear crisis, and, clear up the unstable factors in the Middle East region.

(People's Daily Online April 30, 2006)


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