Brown desperately needs lower oil price

By Sumeet Desai

LONDON (Reuters) - Lower oil prices may be the only thing that can save the economy from a painful slowdown and revive Prime Minister Gordon Brown's fortunes, but like many leaders around the world he is powerless to bring costs down.

A year since taking office, Brown's popularity is in tatters. The economy is on course for its weakest showing in 16 years and the housing market looks primed for a nasty downturn.

The relentless march of crude prices to record highs near $140 (71 opounds) a barrel is partly to blame. Not only is it putting a massive dent in wallets, it's stopping the Bank of England from cutting interest rates to ease the economic pain.

"Rising petrol prices do have an unusually large dampening effect on consumer sentiment," said Philip Shaw, chief economist at banking group Investec.

"The effect of higher oil prices can be seen in the latest CPI data and they are likely to push inflation up further."

G8 IMPOTENCE

How to get high oil prices down will top the agenda at next month's meeting of Group of Eight leaders in Japan. Brown probably has more at stake than the others. His Labour party is 20 points behind in the polls as confidence in him has crumbled.

Underlining his resolve, or perhaps desperation, Brown flew to Saudi Arabia last weekend -- the only G8 leader to make the trip -- to ask leading oil producers to pump more. His Saudi hosts said they would but the oil price only climbed further.