Sept. 22 (Bloomberg) -- Michael Mussa, former chief economist at the International Monetary Fund, says there's only one thing the Group of Seven industrial countries can do to lower world oil prices: ``Pray.''

With the IMF predicting crude oil prices would rise to an average $61.75 a barrel in 2006 from $54.23 this year, G-7 finance ministers meeting tomorrow in Washington will try to ease prices by discussing ways to improve supply and energy efficiency, Tim Adams, international affairs undersecretary at the U.S. Treasury Department, said yesterday.

It won't have any effect, said economists including Mussa and Holger Schmieding, co-head of European economics at Bank of America in London. ``There's little the G-7 can do but talk'' about energy costs, Schmieding said in an interview. ``I don't see any G-7 statement having an effect on oil.''

Oil prices have risen by 43 percent in the past year, stoking inflation, adding to business costs and threatening consumer spending worldwide. Economists at investment banks such as Morgan Stanley & Co. cut their global growth forecasts after oil prices soared this month. The IMF yesterday called rising oil prices a ``significant global risk.''

This week's G-7 meeting won't be the first time the group has tackled energy costs. In May 2004, with oil prices at about $40 a barrel, the ministers issued what U.K. Chancellor of the Exchequer Gordon Brown called a ``tough'' statement aimed at lowering energy costs. Prices fell briefly. They have doubled since, surging to a record $70.85 a barrel on Aug. 30, the day after Hurricane Katrina struck the U.S. Gulf Coast.

Brown's Plan

Brown, the G-7's longest-serving finance minister, said last week he would attend the meeting with a ``five-point plan'' that includes a call for producers to pump more oil and to be more open about crude reserves. He also wants increases in refining capacity, more World Bank loans for alternative energy sources in developing countries and support from the IMF for poorer countries hurt by rising energy costs.

Luxembourg Prime Minister Jean-Claude Juncker, who represents the 12 nations that share the euro at tomorrow's meeting, said he would ask the members of the G-7, especially the U.S., to conserve more energy. The G-7 consists of the U.S., Japan, Germany, the U.K., France, Italy and Canada.

Individual Actions

After Katrina tore into the U.S., the International Energy Agency, a group of 26 oil-consuming countries, agreed to release the equivalent of 2 million barrels of oil a day from emergency reserves. That helped lower prices temporarily. They rose again this week as Hurricane Rita posed a new threat to U.S. Gulf Coast production. The price of oil on the New York Mercantile Exchange was at $67.77 a barrel at 6:50 a.m. in Washington today.

Some countries are acting on their own to insulate their domestic economies. French Finance Minister Thierry Breton last week summoned oil executives to his office and secured pledges of lower pump prices and increased investment by threatening to tax their profits.

The French government also increased aid to farmers and truckers. Brown postponed an annual inflation increase in fuel duties, and Italy is drafting a plan of its own, though it hasn't provided details.

Canadian Finance Minister Ralph Goodale said Sept. 12 that his government is considering proposals to give lower-income Canadians a break on their heating bills. In the U.S., the government is studying ways to encourage industry to build the first new oil refineries in almost 30 years.

Angry Consumers

Such efforts follow attacks on governments by those suffering the most from higher oil prices. Italian gas-station operators are threatening to strike unless gasoline taxes are cut, and U.K. truck drivers protested their country's fuel-tax policy with slow- moving convoys on major highways.

John Manley, Canada's finance minister from June 2002 to December 2003, doesn't expect the G-7 to have much success restraining energy costs. Ministers will discuss the effects of rising oil prices on the world economy, ``but in the short term they can't do anything,'' said Manley, who's now a lawyer at Toronto-based McCarthy Tetrault LLP

John Taylor, the U.S. Treasury's undersecretary of international affairs from August 2001 to April, argues the G-7 has had some success restraining oil prices. The group's past calls for clearer data on oil inventories reduced uncertainty and had a ``mitigating'' effect on prices, Taylor said in an interview from Palo Alto, California, where he teaches economics at Stanford University.

Misplaced Concern

The G-7's emphasis on oil is misplaced, said Robert Rubin, chairman of Citigroup Inc.'s executive committee and Treasury secretary under former President Bill Clinton. Rubin said world leaders should focus on more important issues, such as the U.S.'s record trade and budget deficits, weak economic growth in Europe and Japan, and integrating China and India into the world economy.

``We are at a critical juncture with great strength and enormous challenges we're not meeting,'' Rubin said.

The IMF this week pared its forecast for global economic growth next year to 4.3 percent from 4.4 percent in April and said governments still have a ``considerable way to go'' to combat global imbalances.

To contact the reporters on this story: Kevin Carmichael in Washington at kcarmichael@bloomberg.net; Simon Kennedy in Washington at skennedy4@bloomberg.net

Last Updated: September 22, 2005 07:25 EDT