LEADING energy-consuming nations yesterday urged oil producers to boost their output to counter soaring prices threatening the world economy, while they pledged to develop clean energy technologies and improve efficiency.
The five nations – the United States, China, Japan, India and South Korea – differed, however, on how urgently oil subsidies should be phased out, with Washington backing bold movement while India and China warned of political and economic instabilit
y.
Cabinet ministers from the five countries, which account for more than half the world's consumption of energy, agreed that the sharp surge in oil prices was a menace to the world economy, and more petroleum should be produced to meet rising demand.
"Current oil prices are at abnormal levels," said Japanese trade minister Akira Amari, who hosted the meeting in the northern city of Aomori. "There is an overwhelming lack of investment and production levels have hardly increased over several years."
Oil prices made their biggest single-day surge on Friday, soaring $11 to $138.54 on the New York Mercantile Exchange, an 8% increase. That followed a $5.50 increase the day before, taking oil futures more than 13% higher in just two days.
World oil production has stalled at about 85 million barrels a day since 2005, while global economic growth – boosted by spectacular surges in China and India – has pushed demand to unprecedented levels.
Analysts have also cited the decline of the US dollar, fears about the long-term supply of oil and aggressive speculation as factors in rising prices.
The five consumer countries, meeting before an energy conference of the Group of Eight industrialised nations and Russia today, argued that the unprecedented prices were against the interests of both producers and consumers, and imposed a "heavy burden" on developing countries.
The ministers also vowed to diversify their sources of energy, invest in alternative and renewable fuels, ramp up cooperation in strategic oil stocks in case of a supply shortage, and improve the quality of data on production and inventories available to markets.
The group diverged somewhat over oil subsidies. The International Energy Agency has estimated that oil subsidies in China, India and the Middle East totalled about $55bn in 2007.
The US, which has its own energy subsidies, urged countries such as China to lower their oil supports, which enable domestic consumers to enjoy cheaper gasoline. Subsidies shield consumers from higher prices, meaning consumption does not decline despite rising expenses.
But China and India, while signing on to a statement recognising the need to eventually phase out such subsidies, argued that removing such supports quickly could trigger political and economic instability.
"We are taking very precise and delicate measures so we will not destabilise the government," said Zhang Guibao, China's delegate. "If we face such problems in a country such as China, with a large population… there would be adverse impacts felt throughout the world."
India is already facing such effects. The government on Wednesday hiked gasoline and diesel prices, triggering protests by angry consumers who blocked rail tracks and roads and shut down businesses.
British business secretary John Hutton said yesterday that it was important to work constructively with the governments of China, India and South Korea.
Hutton said: "We must strongly resist the temptation to demonise the new Asia economies. Those who think the answer to dealing with the challenges of climate change is to tell the people of China or India to sacrifice the sort of living standards that we have enjoyed for so long are deeply misguided. It is the right of every person and every nation to strive for a better way of life."
