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Oil price spurt largely speculative: Chidambaram

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New Delhi , Oct. 28

ADMITTING that the high global crude prices was a matter of concern for the Government, the Finance Minister, Mr P. Chidambaram, on Thursday said the spurt in oil prices was largely speculative in nature and there was no justification in crude prices going beyond $35-40 a barrel.

He said that "some countries and companies" were deliberately causing the prices to soar.

These countries and companies are accumulating inventories beyond their actual requirement, while the oil producing countries are taking advantage of this and jacking up prices.

Currently, international crude prices are ruling at about $55 a barrel.

"It is possible that some companies and countries are increasing their inventories of oil. It is also likely, rather convincing, that the oil producing countries are taking advantage of the situation," the Finance Minister said at a CII national conference.

Mr Chidambaram said there were enough oil supplies to keep the prices under control. Even though the demand-supply gap has narrowed down, there are enough surplus supplies available. He said the high crude prices would have an adverse impact on the economy.

"If oil prices continue to rule high, it will rob developing countries like India of a critical percentage of their potential growth. In fact, every $5-a barrel- increase in oil prices affects our GDP by nearly 0.5 per cent and also contributes to inflation," he said.

In this backdrop, he asked the industry to cut costs by working out various innovations.

Mr Chidambaram also expressed concern on the regional disparities within India and asked the industry to explore the possibility of setting up plants, warehouses, trade outlets in those States that "appear less advantageous but may turn more advantageous in the long run" by offering cheap labour and land, as well as less electricity and water problems.

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