World finance chiefs yesterday warned that runaway oil prices could imperil global economic growth, calling on producers to open the taps and for a probe into market swings.
High oil and food prices pose “a serious challenge to stable growth worldwide” and may worsen poverty and stoke global inflation, G8 finance ministers warned after two days of talks here.
The G8 — Britain, Canada, France, Germany, Italy, Japan, Russia and the US — urged “oil-producing countries to increase production and to invest to enhance long-term production capacity.”
Speculators were also in the spotlight with the G8 tasking the IMF to lead a probe into the recent spike in crude oil prices.
The G8 said greater transparency in the oil market and more reliable data were needed, including on “the size of financial flow coming” into it.
But US Treasury Secretary Henry Paulson insisted speculators were not to blame for the fivefold jump in oil prices since 2003.
“All the evidence” points to tight supply and strong demand as the main cause, he told a press conference.
“In the world today,” he added, “what people want to do is look to simple short-term solutions. I think there’s a danger that if people say ‘all this is speculators’ then we won’t do what we need to do. We don’t want to misdiagnose the problem.”
World oil prices have been on a rollercoaster ride recently, soaring close to US$140 a barrel on worries about tight supplies, with some blaming market speculators for aggravating the wild swings.
Currencies were also a hot topic at the G8 meeting amid signs of growing concern in Washington about the weakness of the dollar, although with central bank chiefs absent, they were not mentioned in the G8 statement.
Paulson reiterated Washington’s long-standing policy that “a strong dollar is in our nation’s interest” saying his country’s solid economic fundamentals would support the currency in the long term.
Traders say that Washington appears to have been ratcheting up the rhetoric recently to talk up the US currency so as to keep a lid on inflation and limit the need for interest rate hikes that could stifle economic growth.
“Our economy is going through a tough period right now but we’ve got strong long-term fundamentals. I believe that those fundamentals will be reflected in the currency,” Paulson said.
There has been speculation among currency traders that the G8 may consider a foray onto the market to prop up the dollar if it comes under renewed selling pressure, although Paulson sidestepped a question about intervention.
Analysts say that a weaker US dollar has contributed to higher oil prices, but Paulson said oil prices had “gone up dramatically in every currency.”
The higher cost of fuel has led to protests worldwide, ranging from tens of thousands of truck drivers striking in Spain and Portugal, to street rallies throughout Asia over hikes in subsidized energy prices.
Protests over food prices meanwhile have included riots in Egypt, Haiti and other nations.
The G8 said it expected that food demand “will stay high as emerging economies and developing countries grow.”
The ministers called for emergency assistance for poor countries, efforts to improve food supply and for an end to export restrictions and food subsidies.
The G8 also recognized the benefits of government-controlled sovereign wealth funds. It encouraged the funds to work with the IMF to improve transparency.
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