LUXEMBOURG, 21 October 2004 — Euro zone finance ministers expressed disquiet yesterday at a new surge in oil prices with France calling for urgent action by the European Union to address the latest threat to the bloc’s economic growth. “In view of the urgency of the problem currently facing our countries, I definitely want us to adopt as soon as possible a series of effective measures,” French Finance Minister Nicolas Sarkozy said in a letter to his colleagues. He recalled an appeal by the Group of Seven (G-7) nations to, in his words, “improve market transparency in order to limit uncontrolled speculation” and for the EU to copy the United States in publishing monthly oil stocks data.
Looking ahead, the EU should examine further measures to reduce its reliance on oil, while more immediately “take diplomatic action to urge the oil-producing countries to step up investment in production capacities”.
Luxembourg Prime Minister Jean-Claude Juncker, who is also his country’s finance chief, agreed with Sarkozy that the EU should explore “a common reaction”.
The renewed spike in oil prices “is starting to become a real brake” on growth, he told reporters as he arrived for the monthly euro zone meeting. Oil prices shot back up toward record high levels yesterday after US heating oil stocks fell for the fifth month in a row, fanning fears of a supply crunch during the northern winter.
Reference light sweet crude for November delivery surged by as much as 1.61 dollars to $54.90 in early deals in New York, approaching an all-time high of $55.33 struck on Monday, before easing back to $54.60.
European Commission President Romano Prodi said the oil problem was a “structural” one that needed a long-term response. “Even if we produce the maximum amount of oil possible, global demand of an economy in rude health is more than can be supplied,” he said. “We need to reflect on a global strategy on energy and on new methods of energy production.” The EU executive warned yesterday that because of the high oil prices, it would be forced next week to lower its 2005 growth forecast for the 12-nation euro zone from the current prediction of 2.3 percent.
However, Austrian Finance Minister Karl-Heinz Grasser played down the sense of crisis, arguing that Europe was less reliant relatively on oil today than before and that the oil-producing cartel OPEC was stepping up output. “At the end of the day every bubble must burst and I’m very sure that the oil price bubble will burst,” he said.
And Sarkozy’s appeal for joint EU action received a setback Wednesday when the European Commission said it had dropped plans to create a centralized strategic oil reserve. The EU executive said the plan had run into strong opposition from member states, which manage their own oil reserves in conjunction with the International Energy Agency, and from the European Parliament.
“I am, however, convinced of the necessity for this tool, notably for an improvement in the current system of management of oil stocks at the European level,” EU energy commissioner Loyola de Palacio said in a statement.
