The United States and Asia’s four largest powers voiced “serious concern” Saturday about a record spike in oil prices but vowed to keep scaling back politically sensitive fuel subsidies.
Oil prices, which have soared five-fold since 2003, posted their highest ever one-day gain of 10.75 dollars to close at a new record of 138.54 dollars in New York after hawkish remarks by an Israeli official on oil producer Iran.
Senior officials from the United States, Japan, China, India and South Korea said in a joint statement after talks in Aomori, Japan that they “share serious concerns” about the current level of oil prices.
“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.
US Energy Secretary Samuel Bodman warned oil producers that it would do them no good if the US economy took a hit.
“It’s not good for producing nations to see the US struggling economically (as) they depend on us to be a significant engine in world economic activity,” Bodman told reporters.
Despite the political sensitivity, the joint statement called for a scaling down of fuel subsidies, saying it would “enhance energy efficiency ” and lead to investment in alternative energy.
Developing economies tend to heavily subsidise fuel costs in a bid to ease the burden on the poorest members of society.
India and Indonesia have recently been forced to hike prices amid soaring global crude oil costs, triggering large anti-government demonstrations in the two countries.
India’s oil minister, Murli Deora, cancelled his attendance at the talks in Japan at the last minute due to “domestic reasons,” a Japanese official said on condition of anonymity.
India was represented by its ambassador to Japan, Hemant Krishan Singh, who joined talks with the four countries’ ministers.
“We recognise that, moving forward, phased and gradual withdrawal of price subsidies for conventional energies is desirable,” the joint statement said.
They said that subsidies “should be replaced wherever possible by better targeted policies for intended beneficiaries.”
The talks will be followed Sunday by a meeting of the energy ministers of the Group of Eight industrial powers here in Aomori, a hub of Japan’s nuclear energy industry 600 kilometres (370 miles) north of Tokyo.
Japan’s energy minister Akira Amari, the chair of the meeting, said that rising oil prices were “a major risk factor” for the world economy.
Meeting with South Korea’s Knowledge Economy Minister Lee Youn-Ho, Amari said he believed crude oil prices were “abnormally high.”
“We want to issue a message on this to the world,” Amari said.
Lee added: “I don’t think the oil prices are at normal levels either. It is fairly questionable whether the world economy will be able to develop further at this level of crude oil prices.”
Soaring oil prices have been blamed on a variety of factors including turbulence in the Middle East and rising consumption by emerging economies such as China and India.
Analysts said the sharp spike overnight was a reaction to reported remarks by Israeli Deputy Prime Minister Shaul Mofaz on Iran, a major oil producer.
Mofaz, a former defence chief, warned that the Jewish state would attack Iran if it continued its alleged nuclear weapons drive, although he stressed such an operation could only be conducted with US support.
Despite the spike, Bodman said he did not see oil prices as a “crisis” and denied the need for tighter regulations of oil markets as sought by some US lawmakers. [Read more]