US Treasury Chief says there will be No Quick Fix to Calm Record Oil Price

July 3, 2008 6:04:53 AM PDT
U.S. Treasury Secretary Henry Paulson warned on Thursday that record oil prices are likely to prolong the world economic slowdown. "I think that the oil prices are a strong head wind and at this level, they have got a high risk that they are going to prolong the slowdown," Paulson said at a London news conference as oil traded near the new record reached Thursday, above $145 a barrel.

Paulson, winding up a European tour, held talks on Thursday with British Treasury chief Alistair Darling and banking executives after meetings in Russia, Germany and others in Britain.

Both Paulson and Darling warned that the United States and Britain urgently need to reduce their dependence on oil, cut foreign energy imports and promote investment in renewable alternatives.

However, Paulson also conceded there was unlikely to be any short-term way to lower prices.

Saudi Arabia's oil minister, Ali Naimi, said Thursday that his country has no immediate plans to boost production further, despite the new price record. Earlier Saudi promises to pump more oil have not brought prices down.

"I don't believe this situation avails itself of quick fixes," Paulson said. "But that doesn't mean we shouldn't be focused on this intensely right now, in terms of taking measures that will lead to changes."

Paulson and Darling called for more transparency from oil producers about their reserves and urged the Group of Eight industrialized nations to consider how to increase oil production at a summit in Japan next week.

"There are questions in the short term about the ability to meet the demand," Paulson said.