G8 set to debate oil price crisis
Ministers meet amid growing global discontent over rocketing oil prices.
Published On 8 Jun 2008
Officials from five top consumer nations – Japan, the US, China, India and South Korea, who met in Japan a day eariler to set the stage for the G8 meeting, struggled among themselves to agree on measures to counter soaring prices.
The five, combined, use nearly half the world’s oil.
‘Serious concerns’
They said in a joint statement after the meeting they “share serious concerns over the current level of oil prices”.
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“These prices are unprecedented and against the interest of both consuming and producing countries. They pose a great burden, particularly on resource-scarce developing countries,” it said.
A call from the US for an end to price subsidies that protect many of Asia’s drivers from the soaring cost of fuel met resistance from China and India.
Asia’s two developing powerhouses said they could only raise domestic rates gradually in view of their fragile economies.
‘Few options’
“We as a developing nation are not in a position to completely do away with … subsidies,” Hemant Krishnan Singh, the Indian ambassador who was standing in at the meeting for India’s oil minister, was quoted by Reuters as saying.
Sam Bodman, the US energy secretary, said there were “few things we can do short term”, but said part of the problem was that levels of production had remained the same while demand for oil had increased.
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Oil price puts squeeze on Indonesia“If you look at the rate of oil production globally, it has been 85 million barrels a day for three years in a row,” said Bodman.
But he also put part of the blame on cheap fuel in Asia, where fast-growing economies and low prices have helped drive oil’s explosive six-year rally.
“We know demand is increasing because a lot of nations are still subsidising oil, which ought to stop,” Bodman told delegates.
China spends around $25bn a year to subsidise commodities such as oil products, natural gas, electricity and gas, while India spends around $20bn a year, a Japan trade official said, citing International Energy Agency figures.
India raised fuel prices last week, the country’s second increase in two years, following similar moves by Taiwan, Indonesia and Sri Lanka.
India’s 10 per cent hike prompted protests across the country, but analysts say the price rise is unlikely to have an impact unless rates are allowed to rise faster.
China, the world’s second-largest oil consumer, has raised pump rates only once since mid-2006, increasing them by 10 per cent in November.
The reduction of oil subsidies in Indonesia, where millions live on less than $2 a day, prompted street protests.
Rising prices
The increasing cost of fuel comes at the same time as poor people around the world struggle with rising food prices and many nations fear the soaring costs could create political instability.
Rich nations have also been effected, with the record oil prices triggering protests across Europe.
Many blame the growing number of investors and speculators for inflating food and fuel prices and there is mounting pressure from US legislators to step up oversight of energy markets.
But Bodman said that increased regulation was not the answer to bringing prices down.
Oil prices rocketed on Friday, hitting a new high above $139 a barrel, taking this year’s gains to 44 per cent and continuing a rally that has seen prices rise sevenfold since 2001 as investors see output struggling to keep pace with demand.
Despite their divisions over fuel subsidies, consumer nations at the Aomori meeting pledged to step up investment and said their countries would work to develop clean energy technologies and improve efficiency.
Source: News Agencies