Brown tells Opec to cut oil price to avert risk to global economy

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The Independent Online

Britain has made a direct appeal to the oil producers' cartel Opec to boost production to bring down the vertiginous oil price that poses a "real and emerging risk" to the economic recovery.

Gordon Brown, the Chancellor, said he had contacted Opec's president and was planning to speak to the finance minister of Saudi Arabia, the world's biggest producer.

Britain is also lobbying the finance ministers of the Group of Eight rich nations to use their meeting this weekend to pile pressure on the cartel's 10 members to open their taps.

The Chancellor told a House of Lords committee yesterday: "We are consulting with Opec on recent rises in oil prices and the urgent need to raise production to meet world demand at prices they have themselves said are sustainable."

His intervention came as the average price of a litre of unleaded on Britain's forecourts broke through the 82p barrier, according to the AA.

Opec said last year it would attempt to keep oil prices within a $22 and $28-a-barrel range but this week the price of US crude surged to $41.85 - the highest level since modern records began in 1983.

The US, Spain and Germany have urged Opec to take action, and official figures yesterday pointed to a sharp spike in UK inflation in coming months because of petrol prices.

Ed Balls, the Chancellor's chief economic adviser, later explained the British position. "Oil now presents a real and emerging risk to the global economy," he said.

"It is the UK view that finance ministers this weekend should send a clear message of concern and call for early action. It is important world oil prices return to a level consistent with lasting global prosperity and stability for both oil producing and consuming countries."

Opec may not reject the UK's appeal out of hand. Earlier this week its president, Purnomo Yusgriantoro, said: "I do not like this kind of price. This kind of price will hit the consuming countries."

But a proposal by Saudi Arabia to lift output by 6 per cent, or 2 million barrels a day, failed to stop crude prices in New York ending up near recent highs at $41.55. The plan has been backed by the United Arab Emirates but met hostility from other Opec members who are worried that Opec would be seen as giving in to pressure from the West. Hugo Chavez, the Venezuelan President, said: "If we increased production, we would be committing a grave error like giving a sick person the wrong medicine."

Opec has argued consistently that prices have been kept high by other factors such as fear of terrorist attacks in the Middle East, stockbuilding by the US government and the actions of financial speculators.

In the House of Commons Tony Blair said he understood concerns about the level of oil prices but said the high price was due to a number of factors, including high demand in China and the US. "This is not due to government action," he said.

Mr Blair was challenged by Michael Howard, the Conservative leader, to cancel plans to impose a 2p-a-litre hike in fuel in September. "Last year the Chancellor told us he was going to defer the annual increase in petrol tax because of high and volatile oil prices. Petrol then cost 77p a litre and now costs 82p a litre, and this week oil prices reached a new high," he said.