OECD boss hails high oil prices

The soaring cost of oil is welcome as it sends a clear signal to consumers and firms to curb their use of fuel, the head of the Organisation for Economic Cooperation and Development’s has said.

Speaking at the annual meeting of the world’s richest nations, Angel Gurria said it would be “disastrous” if they cut fuel taxes or subsidised prices.

“The best solution to high oil prices is high prices” to cut demand, he said.

OECD members are trying to agree plans to tackle climate change and lessen the effects of the world financial crisis.

Time is running out to negotiate a new post-Kyoto treaty on climate change.

‘Key challenge’

The Organisation for Economic Co-operation and Development’s annual meeting comes as the world is facing a sharply slowing economy and soaring oil prices, which recently rose above $135 a barrel.

The OECD is uniting business, pressure groups and governments in an effort to find common ground on how to cut greenhouse gas emissions and slow global warming.

The meeting will examine the feasibility of increasing nuclear energy and bio fuels to meet growing energy needs.

And it will look at the role companies can play in encouraging clean technology.

But Mr. Gurria’s comments on the cost of oil will prove controversial at a time when the UK government among others is under growing political pressure to drop plans to tax the most-polluting cars more heavily.

World slowdown

The OECD will also present its economic forecast for the world economy.

It is expected to echo the global prognosis published in April by the International Monetary Fund, which foresaw a global slowdown both longer and deeper than previously thought.

But in an BBC interview, Mr. Gurria stressed: “We cannot allow the temporary slowdown in the world economy to distract us from something which, in 20, 30, 40 or 50 years, will be the most relevant challenge that we have.”

Much discussion will focus on how fragile world financial markets are, despite central banks injecting hundreds of billions of dollars to shore up the banking system.

The conference will be addressed by European Central Bank President Jean-Claude Trichet, one day after the ECB celebrates its 10th anniversary.

Mr. Trichet is expected to emphasise the need for the ECB to stay vigilant against the growing inflationary pressures in Europe fed by high oil prices.

But he may acknowledge, at the encouragement of European governments, that the ECB needs to take account of the sharp slowdown predicted in eurozone growth.

The OECD will also address the growing world food crisis.

In a report last week presented with the UN’s Food and Agriculture Organisation, the OECD forecast that world food prices would remain high for the next decade.

And it is worried that the increase in bio fuels is putting additional pressure on world food supplies.

The meeting will also consider what role sovereign wealth funds – the huge investment funds owned by governments mainly in the Middle East and China – should play in Western countries.

Many rich country governments are concerned that these funds may buy up their strategic assets.

But the OECD is tipped to say that such funds are a crucial way for emerging nations to invest huge trade surpluses that they have accumulated.

Holding the ring

The OECD is a unique world organisation.

Although not part of the UN system, it has been able to play a key role in negotiating agreements among industrial countries over a range of issues, including bribery and offshore financial centres, as well as subsidies in steel, shipbuilding and aircraft manufacture.

It also plays a key monitoring role on development assistance, education, health and environmental measures put in place by governments.

And it hopes that it can be a key forum where an informal dialogue between rich and emerging countries can take place on how to manage globalisation.

With the growing pressures on the world economy, and rising oil and fuel prices, as well as difficulties over the future of world trade talks, this is a formidable task.

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