Rich nations could tap strategic oil reserves if needed to ward off the risk that Middle East political unrest triggers an inflationary price spiral, US Secretary of the Treasury Timothy Geithner said on Thursday.
In wide-ranging testimony before the US Senate Foreign Relations Committee, Geithner again tweaked China for keeping its currency too low and assured lawmakers he was committed to expanding US overseas trade, while playing down risks that oil prices were a threat to a budding recovery.
He said there was “considerable” spare oil production capacity around the world and “substantial” reserves on hand.
“If necessary, those reserves could be mobilized to help mitigate the effect of a severe, sustained supply disruption,” he said.
Political protests have swept through parts of the Middle East and North Africa, sending tremors through markets for fear it could spread to key producers such as Saudi Arabia.
Geithner did not appear to be signaling any short-term intent to dip into US reserves, but rather to make the point that there were options if a lengthy interruption of supplies occurred.
Tapping the Strategic Petroleum Reserve, created in the mid-70s after the Arab oil embargo, is a relatively rare event and it has been US policy to turn to the emergency supply only when faced with a major supply disruption.
The last time it was done was in 2005 following Hurricane Katrina and it drove oil prices down by about 9 percent at the time.
Unrest in oil producer Libya has propelled US crude oil futures above US$100 a barrel in recent days. Crude had traded at about US$86 before protests struck Egypt in late January, the first in a wave of unrest that has encompassed much of the region.
Geithner said the administration of US President Barack Obama was monitoring Middle East developments closely and acknowledged that rising commodity prices — for both food and oil — were causing hardship in many parts of the world by pushing prices up, but he said Americans were feeling less impact.
“In the United States, rising gasoline prices have left consumers with less money to spend, but underlying inflation across all goods and services is modest,” Geithner said.
He also repeated a call for global agreement on “stronger norms for exchange rate policies” to ensure that some countries don’t use an artificially low currency rate to benefit their own economies at the expense of other nations.
“There is broad consensus that the major economies — not just Europe, Japan and the United States, but also the large emerging economies — need to allow their exchange rates to adjust in response to market forces,” Geithner said.
He said the yuan “remains substantially undervalued” and said there has been limited progress in getting Beijing to let it rise in value more rapidly.
The global economy is gradually regaining its footing after three years of crisis, Geithner said, though the pace of growth was uneven and unbalanced.
Geithner pointed to forecasts from the IMF that forecast that emerging-market economies will expand 6.5 percent this year, while Japan and Europe will manage only 1.5 percent growth.
If oil prices stay at about US$110 per barrel, Deutsche Bank economist Peter Hooper estimated it would trim 0.35 percentage points off of US economic output, a moderate hit considering economists expect growth in the 3.4 percent range this year.
NO VIRUS BLUES: A SEMI Taiwan official said that the virus does not slow down the global semiconductor industry’s investment in manufacturing equipment The production value of the nation’s semiconductor industry is expected to grow 16.7 percent this year from last year, outpacing the global industry’s 3.3 percent growth, industry association SEMI said yesterday. That would help Taiwan safeguard its second spot in the global semiconductor market with a production value of more than NT$3 trillion (US$102.73 billion), SEMI Taiwan president Terry Tsao (曹世綸) told a media briefing in Taipei for the Semicon Taiwan trade show beginning today. The global semiconductor industry’s production value is expected to increase to US$426 billion this year, SEMI said. In terms of semiconductor equipment investment, equipment billings from Taiwanese firms
Intel Corp has received licenses from US authorities to continue supplying certain products to Huawei Technologies Co (華為), a company spokesman said yesterday. Washington has been pushing governments around to world to squeeze out Huawei, saying that the telecom giant would hand data to Beijing for espionage. From Monday last week, new curbs have barred US companies from supplying or servicing Huawei. This week, the state-backed China Securities Journal reported that Intel had received permission to supply Huawei. China’s Semiconductor Manufacturing International Corp (SMIC, 中芯國際), which uses US-origin equipment to make chips for Huawei and other companies, last week confirmed that it had sought
NOTABLE SHIFT: By 2030, 50% of all laptops would be assembled in Southeast Asia, while Taiwan would still mostly focus on research and development, a report said Global laptop and desktop computer supply chains are expected to shift significantly away from China in the next 10 years, a Market Intelligence & Consulting Institute (MIC, 產業情報研究所) report said. By 2030, only 40 percent of global laptop production would remain in China, said the report, which was released on Thursday. “The reshuffling of the global supply chain will be one of the most important trends in the next 10 years,” the institute said in the report. “In the long run, key component makers will follow laptop assemblers in moving out of China.” The Taipei-based institute predicted most key component makers
Swancor Renewable Energy Co (上緯新能源) yesterday announced plans for a 4.4 gigawatt (GW) offshore wind project off Miaoli County as part of its commitment toward Taiwan’s energy transformation, the company said in a statement. The “Formosa 4” project includes three deep-water wind farms 18km to 20km off the coast, Swancor Renewable CEO Lucas Lin (林雍堯) said, adding that planning for the project began last year. A proposal for Formosa 4 was this week submitted to the Environmental Protection Agency (EPA), the company said. Swancor Renewable jointly developed the Formosa 1 project, a 128 megawatt (MW) wind farm about 4km off Miaoli and the