SINGAPORE - The Group of Eight industrialised nations will consider next month whether to grant tax breaks to oil companies to spur investment in new refineries, the Financial Times (FT) reported on Tuesday.
US oil prices have climbed back near to record highs over $55 a barrel, fuelled by fears that already stretched global oil refiners will struggle to meet peak demand for diesel and heating oil this winter.
Leaders of the G8, comprising the United States, Japan, Germany, Britain, France, Italy, Canada and Russia, will discuss the plan when they meet in Scotland next month, the FT quoted an unnamed senior energy official as saying.
But it warned that tax breaks would probably encounter political opposition at a time when oil companies are earning bumper profits and lobby groups are pressing for funding for poverty relief.
Environmentalists are also likely to oppose new refineries.
No new oil refineries have been built in the United States since the 1970s due to local opposition and environmental concerns, as well as two decades of low financial returns.
Years of underinvestment caught up with the market last year, when refiners pumping full tilt struggled to keep up with a surge in Chinese demand and stronger than usual US growth.
Although a jump in refining margins and forecasts of strong long-term demand have encouraged new investment in China, India and the Middle East, these new plants are unlikely to start soon enough to soothe concerns about this winter, analysts say.
The G8 plan envisages using tax incentives and planning concessions to encourage investment in western Europe and the United States, the FT said.
US President George W. Bush's administration is also hoping to encourage new refineries, possibly on mililtary bases, but oil company executives have said it makes more financial sense to gradually expand capacity at existing plants.
REUTERS NEWS SERVICE
