PM warns over volatile oil prices

Dec 19 2008

Gordon Brown delivered a stark warning that failure to tackle volatility in oil prices could cost the global economy trillions of dollars.

The Prime Minister said wild variation in prices was the "most pressing challenge" the international community faced.

The problem hits producing countries as well as consuming ones because demand for oil falls when economies slow down, he said. The unpredictability of income made it difficult for producers to plan and invest effectively in infrastructure.

Opening an international oil summit in London, the PM pointed out that over the past 12 months oil prices had rocketed from 60 dollars to 147 dollars per barrel, before plummeting to around 40 dollars.

Research showed those changes had cost the global economy some 150 billion dollars over that period, he said. "Wild fluctuations in market prices harm nations all round the world," Mr Brown insisted. "They damage consumers and producers alike."

The premier went on: "The risk now is that investment in oil and other energy sources will once again stagnate, supply capacity will begin to tighten just as demand responds to improving economic conditions."

Such failure to invest could cost the world economy an estimated 1.3 trillion dollars a year by 2030, Mr Brown warned.

Despite the recent oil price falls, Mr Brown highlighted the danger that they would rise again once the economy recovered.

He called for "transparency" in prices and a "new partnership" between producer and consumer.

The "visionary internationalism" that had been displayed in connection with the global banking crisis must be applied to energy challenges, he insisted. He said it would be a "huge mistake to fall back on the old ways of the past".