European Union finance ministers meeting in Luxembourg late Tuesday expressed concern that surging oil prices could stifle Europe's fledgling economic recovery. They called on OPEC to act to calm the market.
Crude oil rose to $42.33 per barrel on Tuesday
Responding to the recent international surge in oil prices that have made filling the tank a lot more dear for Europeans, finance ministers from the European Union on Tuesday called onthe Organization of Petroleum Exporting Countries (OPEC) to take action to cool off the market.
Following the regular meeting of euro zone finance ministers in Luxembourg, French Economics and Finance Minister Nicolas Sarkozy said the ministers were unified in their desire for a common strategy to halt soaring oil prices. The meeting also set the stage for a larger meeting planned with all 25 EU finance ministers to discuss the undesired price hikes, which have accompanied the war in Iraq and have been compounded by this week's terrorist attacks on petroleum companies in Saudi Arabia.
Germany's Eichel expresses concern
European Central Bank President Jean-Claude Trichet, left, walks past Germany's Finance Minister Hans Eichel, center, and Luxembourg counterpart Jean-Claude Juncker at the start of the Eurogroup council in Luxembourg.
German Finance Minister Hans Eichel (photo, center) said he was concerned that rising oil costs could have consequences for the economy, and warned that any initiative in response to the danger should be coordinated at the EU level. Despite skitishness about the economy, most of the ministers also expressed optimism. Sarkozy noted that even the European Central Bank had weighed in optimistically about the effects of higher oil prices on growth and inflation. As the European Commission recently concluded, the ECB said the price hikes would likely have only a moderate impact on growth and rises in prices.
"We have to be a little bit worried about the impact (of high oil prices) on the economy," Eichel said.
Patting off criticism from the past, EU officials have said they will react in a coordinated manner to oil developments. Just four years ago, in the face of rising oil prices, many European capitals bucked an EU agreement and called for tax cuts and other measures to ease the pain for consumers. Truckers across the continent went on strike, disrupting deliveries, and countries like France, Italy and the Netherlands began giving rebates to commercial operators. France's Sarkozy said the "situation in 2000 should not be repeated," according to the Associated Press.
The European Commission has warned that if the euro exchange rates hold steady, lasting high oil prices could dampen expected economic growth in the euro zone this year by 0.2 percent, reducing the total to 1.5 percent.
German economic experts warn against hysteria
But not all shared that view. The chairman of Germany's influential Council of Economic Advisors, an independent body of five economists that advises the government, disputed the Commission's conclusion and warned against hysteria. Though high oil prices do represent a "certain risk" for the economy, Wolfgang Wiegard told the Berliner Zeitung newspaper, proven calculations suggest that continuing high prices would likely only reduce economic growth by a quarter percentage point per year. "That's why we shouldn't just fall into hysteria," he told the paper.
Not too long ago, Wiegard noted, the strength of the euro was seen as a threat to the economy. But the new paper tiger is oil prices. "In my opinion, it would be wrong to react with hectic measures like sinking the eco tax," he said. "Rising prices signalize an increasing scarcity of oil that can't be remedied through a reduction in the eco tax."
OPEC could lower prices
German Finance Minister Eichel said he was optimistic that OPEC would reach a decision to reduce oil prices at its meeting this Thursday. "Of course, that could be difficult if we must expect further terrorist attacks," Eichel said. "But otherwise, I think, OPEC will be a partner that is concerned about keeping the world economy on track."
On Wednesday, the president of OPEC said the states must increase their oil production despite current near capacity levels in order to alleviate the crisis. "What we need is a volume that can give a really significant impact to oil prices," OPEC President Purnomo Yusgiantoro of Indonesia said.
Saudi police close the way to Al-Khobar Petroleum Center in Khobar, where six people were killed in a terrorist attack this weekend.
OPEC has been struggling to control oil prices amidst concern about the reliability of oil supplies in the wake of war and terrorist attacks in Saudi Arabia, the world's largest oil producer.
On Tuesday, the first day of trading on world markets after the attacks in Khobar, Saudi Arabia, light crude prices in the U.S. jumped by $2.45 to $42.33 per barrel, the highest price in 21 years of oil futures trading on the New York Mercantile Exchange.