DOHA, Qatar – U.S. Treasury Secretary Henry Paulson said Sunday that there was no quick fix to high oil prices, which he called an issue of supply and demand.
Paulson said inflation in the Gulf is "significant" but suggested that Gulf countries pegging their currencies to the weak dollar was not the only reason for it. He said it was a "sovereign decision" by each country whether it wants to de-peg its currency from the dollar.
Speaking to reporters in the tiny Gulf nation of Qatar, Paulson also acknowledged the U.S. economy was experiencing a "downturn" and reiterated that a strong dollar was in the U.S. interest.
The Treasury chief was in the Mideast to deliver a message to officials of Saudi Arabia and other oil-producing nations that soaring oil prices are putting a burden on the global economy. He is urging the countries to open up their oil markets to investment that can boost yields, exploration and production.
With oil at record-high prices, Paulson said there is "no quick fix" because it is an issue of supply and demand. Global demand remains strong while "production capacity has not seen new development," Paulson said.
"I don't see a lot of short-term answers," he added.
He said he would like to see "increased investment throughout the world in oil and gas and alternative sources of energy."
On Wednesday, David McCormick, Treasury's undersecretary for international affairs, said that Paulson will not make any specific request for nations to boost their production.
On a trip to the Middle East earlier this month, U.S. President George W. Bush failed to win the help he sought from Saudi Arabia to relieve skyrocketing gas prices. Saudi officials said they already were meeting the needs of their customers worldwide and there was no need to pump more.
Paulson met with the top political and finance officials in Qatar, a day after he visited Saudi Arabia.
He said the weak dollar is not the only reason for high inflation in Gulf countries.
"The peg serves this country and the region well," Paulson said, referring to Qatar.
He cited the example of Kuwait, which de-pegged from the dollar a year ago and is still combatting inflation.
Kuwait was the first country in the six-member Gulf Cooperation Council, which includes Saudi Arabia, to shun its peg with the dollar by allowing the dinar to float against a basket of currencies. But other Gulf countries including Qatar and the booming United Arab Emirates are believed to be considering the move.
Saudi Arabian Finance Minister Ibrahim al-Assaf said Saturday his country has no intention of depegging its currency from the weakening U.S. dollar. He spoke following a meeting with Paulson.
The dollar's decline has pushed up the cost of imports into the Gulf, fueling inflation. It has also watered down the benefit of record oil prices.
He said the U.S. economy is going through an economic downturn and "welcomes investment from this part of the world."
Iran was also a focus of Paulson's meetings in the Gulf. He said the U.S. was making it more difficult for terrorists to move money around.
"What we found is that Iranian banks have been aggressive and disruptive in moving money through financial systems," he said.
He warned Iran that it is isolating itself from financial sectors and investment banks that they would like to do business with.
There is "plenty of evidence to indicate that many banks are not willing to do business with Iran," Paulson said.
"That sends a message to Iran. If you want to be a rogue state, carry on the way you are. If you want to be part of (the) legitimate financial system and global community, then don't isolate yourself with your actions."