Tuesday July 8, 05:55 PM
G8 says soaring oil, food prices threaten global economy
By Daniel Rook
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TOYAKO, Japan (AFP) - Eight of the world's most powerful leaders called Tuesday for efforts to cool sizzling oil prices, warning soaring fuel and food costs were a threat to world economic growth.
The Group of Eight rich nations said it was ready to take action to cushion global growth from runaway energy costs, but stopped short of announcing concrete steps on the second day of an annual summit.
The G8 nations -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- said the world economy was "facing uncertainty," although they remained positive about the long-term resilience of their economies.
They expressed "strong concern" about oil and food prices, which they said "pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and increase global inflationary pressure."
The higher cost of fuel and food has led to protests worldwide, from tens of thousands of truck drivers striking in Spain and Portugal to street rallies in Asia and riots in Egypt and Haiti.
The G8 said it was "imperative" to remove export restrictions that hinder humanitarian purchases of food and called on nations with sufficient food stocks to release some of their reserves to countries in need.
On climate change, the G8 said they had agreed on the need to at least halve global carbon emissions by 2050, in what leaders hailed as a breakthrough but environmentalists slammed as too little, too late.
The threat from inflation has become the top economic concern for the G8 amid concerns it could dampen consumer spending and require higher interest rates that would act as a brake on growth.
Huddled in talks amid tight security in this spa resort in northern Japan, the G8 called for an increase in oil production and refining capacity to help stem soaring crude prices, which have leapt five-fold since 2003.
But the G8's remarks had little immediate impact on oil prices, which were up almost a dollar a barrel in Asian trade.
Analysts said the reality was that the G8 nations have few obvious options to cool red-hot energy prices in the foreseeable future.
"While they can express serious concern about it I don't think it's really within their sphere of influence," said Glenn Maguire, chief Asia economist at Societe Generale (Paris: FR0000130809 - news) in Hong Kong.
Countries with spare oil supply capacity and emerging economies that are driving up demand "are not under the G8 umbrella," he said.
Saudi Arabia last month agreed to increase its daily oil production, but most members of the OPEC oil cartel remain firmly against an output boost, blaming speculators and the fall in the dollar for the oil price surge.
One way the G8 could try to rein in oil prices would be through efforts to stabilise the US currency, but that would require higher US interest rates or market intervention, which both seem unlikely at the moment, Maguire said.
The summit statement made no mention of the weakness of the US currency, although US President George W. Bush told fellow G8 leaders that he was committed to "a strong dollar."
French President Nicolas Sarkozy said G8 leaders were united in their belief that a weak dollar was bad for the global economy.
"There is now clearly a converging view of the economic damage that can be caused by currency imbalances ... a yuan that is too low and a euro that is too high," he told reporters.
The G8 issued a thinly veiled call on China to allow a stronger yuan, saying that it was vital for some emerging economies with large and growing current account surpluses to allow exchange rate flexibility.
The rich nations' club said it would resist trade protectionism and called for efforts to galvanise stalled global free trade talks.
They recognised that government-controlled sovereign wealth funds were "increasingly important participants in the world economy" and welcomed efforts by some to be more transparent.
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