New Delhi: While the US Congress considers what, if anything, should be done to damp oil trading markets, where prices remain high by historical standards, nations outside the US are watching closely and hoping for big changes.
“Speculators have played a greater role in the market than either buyers or sellers,” finance minister P. Chidambaram said in an interview, weighing in on a hotly debated theory about the price of oil.
Buyers’ group: Finance minister P. Chidambaram suggests creation of an Opec-like group of nations relying on petroleum imports.
Citing testimony given in congressional hearings, Chidambaram said the inflow of $250 billion (Rs10.57 trillion) to commodities indexes indicates that speculators have had a big role in the run-up in prices.
Democrats and Republicans in the US Congress have introduced separate Bills to curb what they contend is excessive speculation. These proposals are vehemently opposed by traders, banks and investors who speculate in oil.
“Why are these markets not regulated?” said Chidambaram, who has an MBA degree from Harvard and has spent most of his political career in economics and finance.
Chidambaram has become a vocal champion of some of the Asian nations whose fast-growing economies are threatened by high oil prices — countries that rely on oil imports but have little leverage over prices.
While rising oil and gas prices are pinching consumers’ wallets and corporate profits in the US and Europe, the consequences have been more drastic in many developing countries. Protests and riots are rife, newly blossoming businesses such as airlines are being crushed and severe inflation looms.
“Four or five years of economic growth are being wiped out in one year,” Chidambaram said. Economists say politicians here are powerless. “There is a general resignation in Asia that little can be done in the short term to influence the global price of crude oil,” said Matt Robinson, an economist with Moody’s based in Sydney, Australia.
Opposition party leaders in India have called for the ouster of Chidambaram because of higher fuel prices. “I wish I had a magic wand to bring down oil prices, and I don’t,” he said.
Chidambaram is one of the few politicians from oil-buying countries to propose concrete changes in the way the world’s crude markets work.
His suggestion is to create a “buyers’ group” that would represent nations that rely on petroleum imports, much like the Organization of the Petroleum Exporting Countries, or Opec, represents producers. This group could sit across the table from Opec and set an acceptable price band that would take into account future production and demand estimates, he said.
“I’m not suggesting a cartel,” Chidambaram said. “I’m only suggesting that all buyers get together and exchange views, like producers do.”