OSAKA, Japan – Soaring oil and food prices are emerging as serious threats to global economic growth, finance ministers from the world's top industrialized nations said Saturday, while vowing to work together to address the problem.
The world economy faces uncertainty and inflationary pressures because of the recent rise in prices, the Group of Eight nations said in a joint statement as they wrapped up two days of talks in western Japan.
The finance ministers from the Group of Eight nations — Britain, Canada, France, Germany, Italy, Japan, Russia and the U.S. — were also mapping out an agenda for a summit of their leaders next month in northern Japan.
They urged oil-producing nations to increase production to help stabilize the spike in oil prices, and called for aid to address a looming food crisis in developing nations.
"Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide," the statement said.
U.S. Treasury Secretary Henry Paulson said the spike in oil prices to new heights was a problem of supply and demand, and not caused by speculators.
"This is not something that lends itself to short-term solutions," he told reporters after the meeting ended.
But British Chancellor Alistair Darling said the ministers asked the International Monetary Fund and the International Energy Agency to analyze the financial factors behind the surging oil and commodity prices, and their effects on the global economy.
"There are differences of views as to what effects speculation has had on prices," Darling told reporters.
Noting oil prices jumped five-fold since 2002, Paulson urged countries to let markets work, not rely on subsidies, and pressed oil-producing countries to allow more investment in oil exploration and production.
"Producers need to increase output and capacity," he said.
Oil spiked to nearly $140 a barrel last week, and several Asian countries, including India, Indonesia and Malaysia, have slashed fuel subsidies, raising prices for millions of consumers.
The world is also facing a potential food emergency as prices of corn, wheat, rice, soybeans and other agriculture products rise. The price hikes have set off riots and protests from Africa to Asia and elevated fears of a global food crisis that could cause millions of people to suffer malnutrition.
The jump in oil and food prices was the main issue addressed during the sessions. The ministers also discussed troubled financial markets and how to help developing nations fight global warming.
Japanese Finance Minister Fukushiro Nukaga, the host of the meeting, said currency exchange was not taken up during the talks, although it was a topic in discussions on the sidelines. He had said earlier the topic did come up in his talks with U.S. Treasury Secretary Paulson, although he refused to give details.
The ministers asked the International Monetary Fund and the International Energy Agency to analyze the financial factors behind the surging oil and commodity prices and their effects on the global economy.
The weak U.S. currency is considered a key culprit in the surge in oil prices because some traders invest in oil as a hedge against inflation and a slumping dollar. It also hurts major exporters like Japan by eroding their repatriated earnings.
The dollar has strengthened in recent days after Paulson warned earlier this week that he isn't ruling out intervening in currency markets to stabilize the currency. U.S. Federal Reserve Chairman Ben Bernanke also helped lift the dollar by suggesting the Fed is prepared to raise interest rates to fight inflation.
The ministers noted some improvement lately in financial markets, but said there are still risks.
"The world economy continues to face uncertainty," the statement said. "We will remain vigilant and will continue to take appropriate actions, individually and collectively."
Oil prices pulled back overnight, with benchmark light sweet crude for July delivery falling $1.88 to settle at $134.86 on the New York Mercantile Exchange, after OPEC questioned whether crude can remain so high.
Soaring energy costs pushed inflation up in May at the fastest pace in six months, according to data released Friday by the U.S. Labor Department. Food prices, which had taken the biggest one-month leap in 18 years in April, rose by a more moderate 0.3 percent in May, but were still on the rise.