G7 pleads for lower oil prices

The big powers are edgy about high oil prices

Finance ministers from the G7 group of wealthy countries have called for lower oil prices at their meeting in New York.

"Low oil prices would benefit the whole world economy," the G7 statement said.

The G7 made clear it wants oil exporters to lift production quotas to cool down prices from their near-record level of more than $40 a barrel.

But the Opec oil producers' cartel has delayed any change in production levels at least until next month.

"We call on all producers to take action to ensure world oil prices return to levels that are consistent with lasting economic prosperity and stability - especially for the poorest nations," said the G7's appeal, which was read out by Gordon Brown, UK Chancellor of the Exchequer.

'Risk to growth'

Overall, the G7 delivered a positive assessment of the world economy, which it said was "strong", with recovery "proceeding rapidly", and its best growth rate in 15 years, of around 4.25% in 2003-2004.

But it said oil prices remain "a risk".

The G7 meeting came one day after a gathering of Opec oil ministers in Amsterdam to discuss oil prices, which are at 21-year highs.

There, the Opec cartel said it was "deeply concerned" about high prices, but put off a decision on raising output quotas until its next meeting on 3 June in Beirut.

Support for Saudi Arabia

The G7's statement was widely seen as throwing its weight behind Saudi Arabia's proposal that Opec should pump an extra two million barrels of oil a day, which failed to win enough backing at the cartel's Amsterdam meeting.

FEARS FOR GROWTH It would be wrong if the oil producers prevented the world economy...from strengthening in the year to come Gordon Brown, UK Chancellor of the Exchequer Click here for a graph of oil prices

Shortly before the G7 meeting got underway in New York, Saudi Arabia - the world's biggest oil exporter - received praise from the French and British finance ministers.

UK Chancellor of the Exchequer Gordon Brown said he believed Saudi Arabia's action was "important" and would "add to pressure on other Opec countries to do the right thing".

"It would be wrong if the oil producers prevented the world economy, which has been through such a difficult time, from strengthening in the year to come," Mr Brown told the BBC.

Opec members opposed to Saudi Arabia's initiative included Venezuela - the world's fifth biggest exporter - and Libya.

Opec has indicated that other factors, like the situation in Iraq, are pushing up oil prices.

The 11-member cartel supplies about a third of the world's oil. Its daily output target is 23.5 million barrels per day, but members are already outstripping that by at least 2 million barrels a day, or 2.5% of global demand.

Opec president Purnomo Yusgiantoro said recently that the cartel could do little to pull prices back within Opec's target range of $22-28 a barrel.

Global demand for oil is growing rapidly, thanks to a healthier US economy and rapid growth in China.

At the same time, the US is trying to replenish stock piles of petrol, which have fallen unusually low ahead of peak summer holiday demand, and Asian nations are trying to protect themselves from future price shocks by establishing their own strategic reserves.

All this activity has pulled speculative money into the oil market, pushing up prices further.

The G7- the US, Japan, Germany, the UK, France, Canada and Italy - also discussed preparations for its two-day summit in the US state of Georgia starting on 8 June.