Germany blames U.S. for oil spike, urges action

Reuters ^ | 8/31/05 | Reuters

[freedom44]

BERLIN, Aug 31 (Reuters) - Germany said on Wednesday the United States was partly to blame for record oil prices and should look to extend its refining capacity after Hurricane Katrina wreaked havoc at U.S. refineries, hitting output.

Economy Minister Wolfgang Clement told German radio that the damage to U.S. refining capacity caused by the storm would likely prompt American industry to buy more oil in Europe, which could further inflate prices.

"On this I must say the United States has had insufficient refining capacity for a long time, and this is presumably now impaired, so the situation is coming to a head," he said.

"It's a U.S. problem, a problem with American policy. It's to do with American planning rights which lead to yield expectations in investments in the sector not being high enough. I hope the American government reacts differently to this."

In view of this Clement said "the American structure, not oil firms" was principally to blame for the oil crunch.

Clement also blamed hedge funds, saying they were probably helping to boost prices via speculation. Overall, he estimated that about $18 per barrel resulted from speculation.

Speaking at a news conference later, Clement said that hedge fund speculation needed to be addressed internationally.

Clement's comments come after warnings from top French officials in recent days about the impact of high oil prices on state finances.

On Tuesday, French President Jacques Chirac called for an overhaul of the country's energy policy, after forecasting that world oil prices were likely to stay high for a long time.

Chirac's Finance Minister Thierry Breton said earlier on Wednesday that high oil prices posed a risk for the public finances of the euro zone's second biggest economy.

GROWTH WORRY

Crude oil prices on world markets have shot to over $70 per barrel since Katrina, one of the most powerful hurricanes in U.S. history, forced operators to close more than a tenth of the country's refining capacity and a quarter of its oil output.

Earlier this week, Germany's BDI industry federation said that if the oil price remained at current levels for the remainder of the year, German growth would likely only reach 0.75 percent rather than the one percent it had forecast.

Clement said recent developments on oil markets had taken everyone by surprise, noting that the storms in the U.S. had had a catastrophic effect. He said the oil spike posed risks to German growth, particularly if exports were affected.

"The world economy is strong so far but it would be even stronger if we didn't have the oil prices," he said.

On Monday Clement said Germany needed to deepen its ties with Russia, its biggest oil supplier, in order to help offset the impact of record crude costs.

Germany is one of the world's biggest energy consumers but has limited natural resources and imports most of its oil.

German Chancellor Gerhard Schroeder, who warned last week of the detrimental effect of oil on consumers, is expected to sign a long-awaited Baltic Sea pipeline deal at a meeting with Russian President Vladimir Putin on Sept. 8 in Berlin.

High oil prices and stubbornly high unemployment have been blamed for holding back German consumer spending, which has acted as a drag on the economy for years. Data on Wednesday showed that German retail sales fell on the month in July for the fifth time in six months.

[SunkenCiv]

aculeus posted this link on the other topic about recent German insults to the US:

http://www.eamonn.com/archives/001969.html#001969

[aculeus]

Bump back.

[Convert from ECUSA]

Thanks!

[SunkenCiv]

Thanks.