High oil prices might become “a symbol of uncertainty” in the global economy if they fail to retreat from near record-high levels, according to Makoto Utsumi, president of Japan Credit Rating Agency Ltd.
Utsumi projects the Group of Seven nations will share optimistic views on the world economy at their Oct. 1 meeting in Washington. He noted, however, that if they judge that crude oil prices will not fall to around $20 or $30 a barrel in the near future, the issue will emerge as a thorn in the side of the global economy.
“We can expect that the G7 may call on China, a major oil-consuming country and the biggest factor in driving up oil prices, to move to adopt energy-saving measures,” Utsumi, a former vice finance minister for international affairs, said in a recent interview ahead of the G7 talks.
“At the same time, the G7 may ask oil-producing countries to further increase output to deal with the situation,” he said.
The continued upswing in crude oil prices and their impact on the world economy, especially on developing economies, are expected to be major topics on the table at the meeting of finance ministers and central bank governors from Britain, Canada, France, Germany, Italy, Japan and the United States.
Crude oil futures have moved around $46 a barrel in recent trading, having hit a record $49.40 on Aug. 20. On Thursday, crude oil futures rose to $49 before ending at $48.46, the second-highest level on record.
Policymakers and economists have called for oil prices to stabilize at $30 to $35 a barrel.
Utsumi voiced concern that high oil prices may affect personal spending in the United States if a larger portion of income is spent to cover rises in gasoline prices and possible hikes in kerosene prices as winter approaches.
The upswing in oil prices may also push up manufacturing and service costs, which would be translated into price increases or result in cuts in capital spending if companies fail to absorb the rises in material prices before final goods or services hit the markets, he said.
Despite widespread jitters over the high oil prices, Utsumi said the G7 members are likely to be upbeat at the upcoming meeting, as a slowdown in the U.S. economy is believed to be only temporary and the world’s biggest economy shows little signs of logging inflation.
The Japanese economy is on a sustained recovery track, despite weaker-than-expected growth in the April-June quarter, and market confidence in the world’s second-largest economy is growing, he said.
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