The US Treasury Secretary said today there is “no quick fix” to high oil prices on a trip designed to urge Mideast producers to allow more outside investment to help boost output.
Henry Paulson told reporters in the tiny Gulf nation of Qatar it was up to Gulf countries currently struggling with high inflation whether they wanted to de-peg their currencies from the dollar. He called it a “sovereign decision”.
He also acknowledged the US economy was experiencing a “downturn” and reiterated that a strong dollar was in the US interest.
Mr Paulson was in the Mideast to deliver a message to officials of Saudi Arabia and other oil-producing nations that soaring oil prices are putting a burden on the global economy. He is urging the countries to open up their oil markets to investment that can boost yields, exploration and production.
He said there is “no quick fix” to the record-breaking price of oil because it is an issue of supply and demand.
“I don’t see a lot of short-term answers,” he said.
He acknowledged that inflation is a problem in the region, but he suggested that the weak dollar is not the only reason for it. He cited the example of Kuwait, which de-pegged from the dollar a year ago and is still combating inflation.
Kuwait was the first country in the six-member Gulf Co-operation Council, which includes Saudi Arabia, to shun its peg with the dollar by allowing the dinar to float against a basket of currencies. But other Gulf countries including Qatar and the booming United Arab Emirates are believed to be considering the move.
The dollar’s decline has pushed up the cost of imports into the Gulf, fuelling inflation. The decline has also watered down the benefit of record oil prices.
On Wednesday, David McCormick, the US Treasury’s under-secretary for international affairs, said that Mr Paulson will not make any specific request for nations to boost their production.
On a trip to the Middle East earlier this month, US President George Bush failed to win the help he sought from Saudi Arabia to relieve skyrocketing US petrol prices. Saudi officials said they already were meeting the needs of their customers worldwide and there was no need to pump more.