G-8 Says Oil, Food Prices Pose Threat to World Economy

OSAKA, Japan, June 14 -- Finance ministers from the Group of Eight industrialized nations urged oil producers Saturday to boost output to help stabilize record-high oil and food prices, calling the situation a serious threat to global economic growth.

The world economy faces "headwinds" because of the recent rise in prices, the G-8 ministers said in a joint statement at the conclusion of two days of talks here.

"Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressure," the statement said.

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' opinions that speculative trading in oil markets is pushing up prices.

U.S. Treasury Secretary Henry M. Paulson Jr. insisted that the problem stems primarily from tight supplies and warned against embracing "short-term solutions."

He pressed oil-producing countries to allow more investment in oil exploration and production.

"There's a danger if people say, 'Oh, it's the speculators,' " Paulson told reporters after the meeting. "We don't want to misdiagnose the problem."

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

Japanese Finance Minister Fukushiro Nukaga, chair of the G-8 meeting, downplayed any differences among members, saying they "don't yet have a full understanding of what is actually happening."

The agenda for the G-8 talks 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 $10-billion clean technology fund, to help developing countries fight global warming.

The ministers from the G-8 nations -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- noted some recent improvement in financial markets.

"The world economy continues to face uncertainty and downside risks persist," their statement said. "We will remain vigilant and will continue to take appropriate actions, individually and collectively, in order to secure stability and growth in our economies and globally."