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.
Photo: AFP
“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.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary