Paulson Sees No Short Term Solution to Soaring Oil Prices

DOHA, Qatar- On his trip to Middle East, U.S. Treasury Secretary Henry Paulson said that there is "no quick fix" to high oil prices because it is an issue of supply and demand. The production capacity has not seen any new development whereas the global demand is increasing day- by-day due to the burgeoning population and increasing needs of the growing economies.

"I don't see a lot of short-term answers," he said. He also said that he would like to see "increased investment throughout the world in oil and gas and alternative sources of energy."

The purpose of the visit is 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 and there is a need to open up oil markets to investment that can boost yields, exploration and production.

He also acknowledged the fact that U.S. economy was experiencing a "downturn" while reiterating that a strong dollar was in the interest of the U.S.

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.

A day after visiting Saudi Arabia, Paulson met the top political and finance officials in Qatar, He also 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. "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 combating 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. 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.