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G-8 urge oil-producing nations to boost output

business Updated: Jun 15, 2008 10:56 IST
G-8 ministers urge oil-producing nations to boost output; warn of 'serious challenges' ahead

Finance ministers from the Group of Eight industrialized nations urged oil producers to boost output to help stabilize record-high oil and food prices, calling the situation a serious threat to global economic growth.

"Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide," the G-8 ministers said in a joint statement Saturday at the conclusion of two days of talks in Osaka in western Japan.

The fundamental factor driving oil prices is the imbalance between rising global demand and supply constraints, the ministers said. They added that geopolitical and financial factors also play a role - a reflection of some ministers' view that speculative trading in oil markets is pushing up prices.

U.S. Treasury Secretary Henry Paulson insisted the problem stems primarily from tight supplies.

Noting oil prices have jumped fivefold since 2002, Paulson in a statement called on countries to reduce reliance on subsidies and pressed for more investment in oil exploration and production. "I think there's a danger if people say, 'Oh, it's the speculators,"' Paulson told reporters. "We don't want to misdiagnose the problem. And if you look at the problem, I think it's pretty clear. We have not had an increase in production capacity in oil for the last 10 years."

Echoing Paulson, British Chancellor Alistair Darling said focusing too heavily on speculators distracts from the main issue. "What we need to do, as a matter of urgency, is to increase supplies," he said.

But other G-8 members, particularly France, Germany and Italy, place greater blame on speculators.

Italian Finance Minister Giulio Tremonti said "enormous" speculation is behind the rising energy prices. He has proposed an increase in margins needed to trade oil futures contracts. Japanese Finance Minister Fukushiro Nukaga, chair of the G-8 meeting, downplayed any differences among members, saying they simply "don't yet have a full understanding of what is actually happening."

To help find out, the ministers asked the International Monetary Fund and the International Energy Agency for a report later this year on the factors behind surging oil and commodity prices. The agenda for the G-8 talks _ among Britain, Canada, France, Germany, Italy, Japan, Russia and the US - also included troubled financial markets, private-sector-led development in Africa and global warming.

The ministers said they "welcome and support" a pair of new funds, including a US$10-billion clean technology fund, to help developing countries fight global warming.

Next up on the G-8 schedule is a July 7-9 leaders' summit in northern Japan.

Associated Press writer Yuri Kageyama contributed to this report.