Maravi

IMF calls for urgent policy action on oil investment

IMF calls for urgent policy action on oil investment
By Joan Chirwa
Saturday April 26, 2008 [04:00]

THE International Monetary Fund (IMF) has called for urgent policy action in the area of oil investment for stability in markets as well as the global economy. Speaking at the 11th Energy Forum and 3rd International Energy Business Forum in Italy this week, IMF first deputy managing director John Lipsky said oil markets were linked to most industries, and therefore affected all households and countries in an event of skyrocketing prices of the commodity.

International oil prices have soared to above US $110 per barrel, causing major hikes in food prices worldwide and other basic commodities.

Oil importing countries are the worst hit, with Zambia’s cost of living for a family of six in Lusaka hitting above K1.8 million in the March basic needs basket compiled by the Jesuit Centre for Theological Reflection (JCTR).

“Oil market conditions and policies, as well as those for other commodities, must therefore be considered in a global context. The supply response can be enhanced by improving the stability and predictability of investment regimes, encouraging greater cooperation between national and international oil companies, and increasing transparency through better oil market data,” Lipsky said.

“For consumers, policies should aim to achieve full pass-through of international oil prices to domestic prices and to signal environmental costs. Actions are most likely to be successful if undertaken in a multilateral context where everyone does their share to improve the supply-demand balance in oil markets, which in turn would make these markets less vulnerable to shocks and therefore more stable. A more stable oil market is critical to attaining a more stable global economy.”

Lipsky further said the sharp surge in oil prices since the beginning of 2007, on top of substantial increases since 2002, has been a wake-up call for public officials and market participants.

“With global growth slowing, markets expected oil prices to decline below $80 per barrel as late as October of last year. Instead, prices have continued to surge to over $115 per barrel, as after almost two decades of substantial spare capacity, demand has fully caught up with production capacity,” said Lipsky.

Labels: IMF, INFLATION, OIL

posted by MrK @ 3:14 AM