G8 says soaring oil, food prices threaten economy

JAPAN: 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 they were ready to take action to cushion global growth from runaway commodity costs.

But they stopped short of announcing concrete steps in a joint statement on the economy released on the second day of a summit in this spa resort in northern Japan.

The G8 — Britain, Canada, France, Germany, Italy, Japan, Russia and the United States — said they remained positive about the long-term resilience of their economies, noting that emerging economies were still growing strongly.

But the world economy was “facing uncertainty” and risks to growth remained.

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 threat from inflation, which has led to protests worldwide, has become the top economic concern for the major industrialised nations.

The G8 called for an increase in oil production and refining capacity to help stem soaring crude prices, which have soared five-fold since 2003.

“We have strong concerns about the sharp rise in oil prices, which poses risks to the global economy,” the leaders said.

“On the supply side, production and refining capacities should be increased in the short term,” they said, calling for “concerted efforts” to address the underlying causes of the spike in crude prices to above 140 dollars a barrel.

The G8’s remarks had little immediate impact on oil prices, which were up almost a dollar a barrel in Asian trade.

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 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.”

“The president of course reaffirmed his interest in a strong dollar and his commitment to a strong dollar,” said Dan Price, Bush’s assistant for international economic affairs.

Other G8 leaders did not comment on Bush’s remarks on the dollar, a Japanese foreign ministry official told reporters.

Analysts say that a weaker dollar is contributing to surge in oil prices, which are priced in the US currency, partly because investors have been buying oil as a hedge against a slide in the value of the greenback.

But traders see little immediate prospect of coordinated market intervention by the G8 to prop up the greenback as European nations may be reluctant to see their own currencies slide as that could stoke inflation.

The G8 issued a thinly veiled call on China to allow a stronger yuan, saying 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 the urgent conclusion of the stalled World Trade Organisation Doha round of free trade talks.

“We will resist protectionist pressures against international trade and investment in all its manifestations,” the statement said.

“A successful conclusion of an ambitious, balanced and comprehensive WTO Doha agreement is critical to economic growth and development,” the G8 said.

Toyako, Tuesday, AFP