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Brown Demands Emergency Plan To Stop Oil Wrecking Recovery

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Brown demands emergency plan to stop oil wrecking recovery

Gordon Brown has ordered top ministers at the Treasury and Department of Business to draw up plans to cope with rising oil prices and a lending drought for UK companies, amid fears that the nation's economic recovery risks being derailed.

Brown is seeking an international agreement to tackle the rising cost of crude, which rose to almost $72 a barrel on Friday.

With Gulf economies including Saudi Arabia at risk of plunging into recession later this year, according to private forecasts by the International Monetary Fund, western governments fear Opec producers will have a powerful incentive to restrict oil production and force prices even higher.

Whitehall officials are examining proposals for handing the IMF the task of monitoring oil prices as part of the Washington lender's new beefed-up role as guardian of the global economy. The plan could form part of Britain's agenda for the next summit of G20 leaders in Pittsburgh, in the US, this autumn.

Brown believes that the G20 meeting in London in the spring missed an opportunity to put in place measures to stabilise the oil price, after it fell from a peak of $147 a barrel to less than $35 early this year.

The concern now in Whitehall is that higher commodity prices will spark inflation and tempt the Bank of England to tighten policy before the economy is fully back on its feet.

The Treasury's confidence in the Bank's ability to manage the delicate job of withdrawing the massive stimulus package at the right time was dented by Threadneedle Street's reluctance to slash interest rates last year as the economy nose-dived.

Downing Street is also nervous that the failure of banks to turn on the lending taps could leave Britain's businesses unable to invest for recovery. Bank figures revealed last week that lending to businesses actually fell in April, by the highest amount in nine years.

Ministers have ordered officials to conduct an in-depth probe of recent lending figures in order to see whether the problem lies with weak demand from industry or a reluctance by banks to lend.

Some firms have been able to exploit a rising stockmarket to raise money from share issues, but the government is worried about small- and medium-sized companies that rely heavily on banks for their finance.

The chancellor pointed to the perils of high oil prices in his Mansion House speech to the City last week. He said a $25-a-barrel rise in oil prices over the past three months was a growing concern. "A sharp spike in commodity prices could slow down the recovery. We must act - together with other countries - to reduce price volatility," he said.

Hinting at the government's policy agenda, Darling said Britain wanted improved transparency in oil markets, the removal of barriers to energy supply and better energy efficiency.

The government believes the current oil price is not justified by the weakness of the global economy and that international action could bring it back down to a fairer level.

Tentative green shoots have begun to emerge in the UK over recent weeks, with the housing market stabilising and industry surveys beginning to suggest the worst is over - but the prime minister is keen to rein in hopes of a rapid return to business as usual.

High crude prices are a boon for the HMRC coffers.

If Gordon really wanted to stimulate the economy, he could start by changing the petro revenue/energy taxes to flat schemes for starters, or lowering them...not gonna happen under any government.

Just typical politician double speak and electioneering.

Edited by cashinmattress

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Guardian headline - economy to blame for economic troubles, not govt

I'll get my coat!


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Oil price controls? Haha.

What ever next?

Obviously Gordon hasn't heard of Peak Oil. The market dictates the price via supply and demand. Interventionist policy won't work.

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