Oil hike sparks 'serious concern'

The US and the four largest economies in Asia are to voice “serious concerns” over “unprecedented” oil prices, a day after a record one-day jump.

Crude oil in New York surged more than $10 to $139 a barrel on Friday.

In a statement to be issued after G8 talks, the five countries will say prices pose a great burden, especially on developing countries, AFP reported.

Earlier, US energy secretary Samuel Bodman said the price surge was a “shock”, but not a crisis.

Officials and ministers from the Group of Eight key industrialised nations (G8), as well as China, India and South Korea, are meeting for two days in the northern city of Aomori, to plot a strategy to deal with volatility in oil, gas and coal markets.

The soaring cost of oil is causing growing strain to economies around the world, with some governments facing protests and other pressures from consumers and businesses.

But Mr Bodman dismissed suggestions that the world faced a crisis, amid fears the oil price spike could help tip some of the world’s economies into recession.

The statement, to be signed by energy ministers from the US, Japan, China and South Korea and a senior Indian official, is expected to say that price rises are “against the interest of both consuming and producing countries”.

It will also say that “phased and gradual” withdrawal of price subsidies – blamed by some for fuelling demand in emerging economies – is “desirable”, AFP reported.

Both the Indian and Malaysian governments have raised fuel prices in order to cut the subsidies they provide.

Friday’s spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

Demand and supply

“It’s a shock, but if you look at the rate of oil production globally, it has been 85 million barrels a day for three years in a row,” Mr Bodman said ahead of the G8 talks.

“We know demand is increasing because a lot of nations are still subsidising oil, which ought to stop,” he said.

He also said he did not see a need for a tightening of regulation of oil markets.

Some say market speculation, and a lack of disclosure of information over the size and nature of reserves, may be stoking the price rises, as well as concerns that demand may be growing faster than supply.

On Friday light crude set a high of $139.12 in after-hours trading on the New York Mercantile Exchange after hitting $138.54 at the regular session.

Crude oil hit a record high of $135 a barrel last month.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July.

Some analysts have suggested that prices would reach as high as $200 a barrel during the next 18 months.

The benchmark light, sweet crude oil is more than twice the price it was a year ago.

On Friday, the market was also responding to a statement by Israel’s transport minister that an attack on Iran was “unavoidable” after sanctions to prevent Tehran from developing its nuclear capability had failed.

Investors hedging oil against the weak dollar has also pushed up the price of oil.

Correspondents say fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters, as well as Israeli threats to strike Iran over its nuclear programme.

Oil prices had recorded losses earlier this week after doubts about future demand took hold of the market.