Sky-high oil prices here to stay, says IMF chief

The head of the International Monetary Fund says higher fuel prices will continue for the foreseeable future, as the world’s seven largest economic powers gather in Washington today.

Rising energy prices will figure prominently on the agenda and the discussions on worldwide economic matters will carry over into the weekend meetings of the International Monetary Fund and the World Bank.

So far, the world economy had coped well with the rising cost of energy, but surging prices posed a serious risk down the road, IMF chief Rodrigo Rato said.

“It is likely that higher prices are going to last, and we are all going to have to adjust to that,” he said.

In the US, oil prices closed at a record high of €72.17 a barrel on Wednesday and slipped to €71.95 yesterday.

The US, Japan, Germany, France, Britain, Italy and Canada make up the Group of Seven most industrialised countries in the world.

Rato said reducing obstacles to investment to boost energy supplies, reinvigorating conservation programmes and improving oil market statistics could be done to help improve the situation.

“These measures would take some time to have their full effect, but taking them would help calm the oil market,” Rato said.

US treasury secretary John Snow, in talks with Chinese officials, touched on an issue expected to surface during the finance chiefs’ meeting – prodding China to revamp its currency policy.

Snow met Zhou Xiaochuan, the head of China’s central bank, and Ma Kai, head of the National Development and Reform Commission, and discussed the importance of greater currency flexibility in China, a treasury official said.

President George Bush voiced hope for more progress in this area to Chinese president Hu Jintao, who visited the White House yesterday.

World Bank president Paul Wolfowitz, looking ahead to this weekend’s meetings, stressed the importance of efforts to thwart corruption, which could be an obstacle to effective development. “There is a lot the international community can do,” he said.

He was briefly interrupted by hecklers who chanted: “Corporate corruption, who can we thank? The IMF and the World Bank.”

Rato, in a speech to the Institute for International Economics, talked about the need for increases in the voting power for some countries at the fund and the search for ways to broaden its sources of income. With the global economy thriving, the fund’s revenue from lending has lessened.

“There are some things we can do, including restraint in our operational budget and setting user fees for some of our technical assistance,” Rato said.

“But if members want the fund to continue the work that we have been doing in many areas – and they tell me repeatedly that they do – we will need to broaden the fund’s income base.”