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India on Monday said that it will follow up its suggestion on having a price band for crude oil once the producing nations reflect on the idea, even as it asked them to step up oil output.
"It (price band) is an idea that I have mooted in the earlier IMF (International Monetary Fund) meetings and it is the first time I am addressing an oil ministerial meeting. So let them reflect on that, we will follow it up," Finance Minister P Chidambaram told NDTV before leaving for India.
Explaining his proposal mooted at the Energy Ministers' meeting in Jeddah, the finance minister said the suggestion is that producing countries will assure the world that prices will not rise above a level and consuming countries will assure the world that prices will not fall below a level, between which prices can be determined by the market forces.
Crude oil prices are not under India's control, the finance minister said, adding that the prices will cool down only if producing countries increase supply and the countries concerned regulate over-the-counter trade or futures trading in oil.
"In August, 2007, it (crude prices) was $70 a barrel and a few days ago it had touched $140 a barrel... Those are not under India's control... So we have urged producing countries to increase supply. We have urged countries where these financial transactions are taking place to step in and regulate these transactions," he said.
At the Energy Ministers' meeting, Chidambaram had on Sunday blamed speculators for the surge in global crude prices and said that this is threatening to 'wipe out' economic gains of developing countries.
Rejecting suggestions that rising demand was leading to spurt in crude prices, he said: "The causes for the current pandemonium in oil prices lie...in unregulated over-the-counter markets and future trading in oil" and urged nations to wrest control of oil trading from the hands of speculators.
Wondering how oil prices have doubled from $70 a barrel from August 2007, Chidambaram said: "There is ample evidence that large financial institutions, pension funds, hedge funds etc have channelised billions of dollars -- nay, trillion of dollars -- into commodity investments and commodity derivatives."
It is common knowledge that these financial transactions are unregulated and highly opaque, the Finance Minister, who accompanied Petroleum Minister Murli Deora to the meeting, said, adding that the demand for oil generated by these funds is purely speculative.
The surge in global oil prices had prompted India to increase fuel prices early this month that caused inflation to surge to a 13 year high of 11.05 per cent in India.
"Three weeks ago, India passed on barely nine per cent of the required price increase to the consumers: The result is that the inflation measured by wholesale prices has crossed 11 per cent," he said, adding that even oil producers like Russia, Saudi Arabia and Venezuela faced high inflation rates.
He warned the oil producing nations that "if the global economy slows down or slips into a recession due to high oil prices, that will eventually hurt all of us...We firmly believe that the current level of international oil prices is in the interest of neither oil producing countries nor the consuming countries."