Rising Oil Prices Split APEC

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Friday September 8, 6:27 am Eastern Time Rising Oil Prices Split APEC By Sabyasachi Mitra

BANDAR SERI BEGAWAN (Reuters) - Soaring global crude oil prices cast a shadow on a meeting of senior policy makers from Pacific Rim nations as officials fear high energy costs could blunt the stunning economic recovery in Asian economies.

``My own view is that the if the prices remain at this level it does affect growth,'' Kunio Saito, IMF's director for Asia and the Pacific, told Reuters.

Saito heads the International Monetary Fund delegation at the two-day meeting in the oil-rich kingdom of Brunei of senior finance ministry and central bank officials of the Asia-Pacific Economic Cooperation (APEC) group.

Crude oil prices touched a 10-year high of $35.46 per barrel on Thursday before falling back a little. The average price of crude this year is $28.

``I think we are already seeing some of the consequences of the high level of prices,'' New Zealand Finance Minister Michael Cullen told reporters.

A senior World Bank official attending the meetings said if crude oil prices remain at present levels, it could hurt growth in the region and even impact economies untouched by the Asian financial crisis in 1997-98.

RISK OF INFLATION AND GROWTH CURBS

``There are two types of risk. One is inflation and the other is that it would cut off options (of growth) in many of these economies,'' said Amar Bhattacharya, a senior adviser at the World Bank.

``And if it does, then the decline will affect all economies, not just the ones that were affected by the crisis.''

He said some recovery in global crude oil prices, which tumbled to 25-year lows of around $10 per barrel about two years ago, was desirable but doubted if the current record high levels were sustainable.

``It has benefitted some APEC economies and probably some recovery in oil prices was needed. But if it goes too high, the sustainability of that price becomes questionable,'' he said.

DIVERGENCE WITHIN APEC

Finance ministers from Pacific Rim nations gathering in Brunei during the weekend are expected to debate the sensitive issue of high oil prices ahead of a crucial production quota meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna on Sunday.

``I have already expressed our concern about oil prices,'' said Pakorn Malakul Na Ayutthaya, Thailand's deputy central bank governor.

Officials said APEC was split on the issue of high global crude oil prices.

``I suspect at this meeting there will be some divergence of views between Brunei, Indonesia and Malaysia, who are net gainers from (the) recent surge in oil prices and countries like Japan, New Zealand and others who are suffering some consequences,'' Cullen said.

APEC members Brunei, Malaysia, Indonesia and Mexico are significant oil exporters and are expected to oppose any move by the regional grouping to urge OPEC to raise output in hopes the higher supply brings lower prices, even though some members do want to bring up the issue.

Brunei's Deputy Finance Minister Selamat Munap told Reuters that the rainforest kingdom on Borneo island expects to reap a windfall from soaring global crude prices.

``Well, oil is an issue and some of the ministers would like to raise the issue,'' said John Wilson, a senior New Zealand treasury official.

APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States, and Vietnam.

http://biz.yahoo.com/rb/000908/6.html

-- Martin Thompson (mthom1927@aol.com), September 08, 2000


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