MercoPress. South Atlantic News Agency

G-8: High oil prices, top threat to world economy

Finance ministers from the Group of Eight nations meeting in Moscow singled out high oil prices as the top threat to the world economy and focused discussion on ensuring access to fuel supplies.

With oil costing above 65 US dollars a barrel, energy security emerged as the G-8's chief concern in the first meeting held in Russia, which is also the world's second producer behind Saudi Arabia.

"High and volatile oil prices" remain a risk to global growth, the ministers said in a statement released after their two-day meeting. "Market mechanisms are vital to the effective functioning of the global energy system."

Oil prices have risen 30% in the past 12 months, which is stoking inflation, adding to business costs and hampering consumer spending in the world's richest nations, which together consume more than 50% of the world's crude.

"The world economy has absorbed oil price increases, but prices will be high for some time" International Monetary Fund Managing Director Rodrigo de Rato, said in an interview after meeting the ministers. That "could produce macroeconomic disturbances that we haven't seen yet."

The G-8 statement also said the global economic expansion "remains solid and is expected to continue in 2006." More progress needs to be made in narrowing economic disparities such as a record U.S. trade deficit and weak growth in Asia and Europe.

"The global economy remains strong and there are signs that the expansion will continue" U.S. Treasury Secretary John Snow said. "All countries bear a responsibility to help effect global adjustment in a way that maximizes and sustains growth."

Avian influenza, outbreaks of which were today reported in the European Union for the first time, may also pose problems for the world economy and financial markets, the ministers said. There was no mention of currencies because central bankers did not attend the gathering.

The Group of Seven governments, which exclude Russia, have been griping about the price of oil since May 2004 when a barrel cost around 40 US dollars. After pleas for fuel producers to pump more failed to restrain prices, officials began focusing on calling for energy supplies to be made more transparent, efficient and diverse, while seeking enhanced investment in production and refining capacity.

G-8 also urged the World Bank to assist emerging economies in developing renewable energy projects. The ministers also urged more action in the World Trade Organization (WTO) to open global markets in agriculture, industrial products, financial services and intellectual-property rights.

The meeting in Moscow marked Russia's first as president of the G-8, which also includes Britain, Canada, France, Germany, Italy, Japan and the United States.

President Bush and other leaders of G-8 countries are to meet for a summit in St. Petersburg in July.