Shared solutions in short supply at G8 energy meet
Energy ministers from the world’s biggest nations should find common ground in northern Japan this weekend with a shared concern that soaring oil, coal and gas prices are endangering economic growth.
When it comes to how they should respond, however, they may be continents apart. Japan hosts the June 7-8 meeting ahead of a Group of Eight leaders’ summit in July, when heads of state will face up to record oil prices that have triggered protests across Europe, pushed airlines into the red and forced Asian countries into unwanted fuel price rises, intensifying inflationary pressures.
“They are causing an unbearable burden to developing countries and distorting the global economy,” Japan’s Trade Minister Akira Amari told reporters on Monday, less than two weeks after crude oil hit a record high above $135 a barrel. He hopes to bring the group together behind a clear message: prices this high are not normal, and both consuming and producing nations must respond.
But finding common purpose among a group that runs from top consumer the United States to free-market supplier Canada to nationalistic number-two oil exporter Russia will be a challenge. When you add in three additional Asian energy consumers attending the meeting -- China, India and South Korea -- the task of finding common ground becomes Herculean.
Heavy fuel price subsidies supported by Beijing and New Delhi have aided booming demand in recent years, one of the drivers for oil’s five-year rally that has seen prices rise six fold, and both are beginning to build up strategic oil stocks that Western nations fear could be used to influence prices. "Views among the G8 nations may not necessarily be the same," said Shigeru Suehiro, senior economist at the Institute of Energy Economics, Japan (IEE).
The scale of the challenge they all face will be made clear on Friday, when the International Energy Agency delivers its Energy Technology Perspectives report, commissioned at the Gleneagles G8 meeting three years ago to map a plan for cutting harmful emissions while still meeting future energy demand.
A clash over ideas is already starting to show. The UK and France have urged the G8 to take collective global action, which could help rein in spiraling oil prices, but Canada’s Finance Minister Jim Flaherty appeared to reject that idea last week, saying that only markets could set prices. Amari, who heads energy policy for the world’s most import-dependent major consumer, has urged oil-producing nations to take responsibility for the rally rather than blame it on speculators or the weakening dollar. Hopes that jawboning OPEC may provoke some assurances about their ability to meet supply could be misplaced.
“Even if G8 comes up with a statement urging producers to boost investment, I don’t think many of them will react swiftly to take action,” IEE’s Suehiro said. “The market could be tight on supplies now, but perhaps not facing a shortage. In this kind of situation, producers aren’t expected to act jointly to boost output to cut prices,” he said. And OPEC is not alone in taking aim at traders rather than fundamentals.
US politicians have put pressure on regulators to stem the influx of investment capital and speculative hedge fund money into commodities markets, hoping that will stem the rise. The Commodity Futures Trading Commission responded last week, saying it was investigating oil-market trading and beefing up reporting requirements for big funds. But speculators alone cannot explain gains, analysts say, and Japan’s Amari has already voiced reservations about whether better market policing will temper prices. (Reuters)
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