Energy officials from five top consumer nations urged producers to step up investment on Saturday, a day after crude's biggest surge ever, but they offered no new ideas on how to deal with record prices and remained divided on fuel subsidies. Japan, the United States, China, India and South Korea -- who together guzzle nearly half the world's oil -- said that they had agreed on the need for greater transparency in energy markets and more investment by consumers and producers both, while stopping short of calling on OPEC to pump more crude today.
AOMORI, Japan (Reuters) - Energy officials from five top consumer nations urged producers to step up investment on Saturday, a day after crude's biggest surge ever, but they offered no new ideas on how to deal with record prices and remained divided on fuel subsidies.
Japan, the United States, China, India and South Korea -- who together guzzle nearly half the world's oil -- said that they had agreed on the need for greater transparency in energy markets and more investment by consumers and producers both, while stopping short of calling on OPEC to pump more crude today.
!ADVERTISEMENT!
But a call from the United States for an end to heavy price subsidies that protect many Asian drivers from soaring costs fell on deaf ears, as China and India said they could only raise domestic rates gradually in view of their fragile economies.
On Sunday the full Group of Eight energy ministers will meet amid unprecedented volatility in the oil market and growing public discontent over governments' failure to soften the blow, which worsened with Friday's more-than-$10 surge to a record $139.
Energy Secretary Sam Bodman pointed part of the blame at cheap fuel in Asia, where fast-growing economies and low prices have helped drive oil's explosive six-year rally.
"We know demand is increasing because a lot of nations are still subsidizing oil, which ought to stop," Bodman said.
But India's ambassador later told Reuters it was unrealistic to abandon controls that help protect its 1.1 billion people.
"We as a developing nation are not in a position to completely do away with ... subsidies," said Hemant Krishnan Singh, who is standing in for the oil minister at the meetings.
India followed Taiwan, Indonesia and Sri Lanka in raising domestic fuel prices this week with only its second increase in two years, but analysts said the 10 percent hike was unlikely to have an impact unless rates were allowed to rise faster.
China, the world's second-largest oil consumer, has raised pump rates only once since mid-2006, increasing them by 10 percent in November, and analysts see few signs of action soon with policymakers focused on taming inflation.
"We still have some weak industries such as agriculture, the taxi industry and the public transportation sector," said Zhang Guobao, chief of China's State Energy Bureau. China has long said it aims to allow resource prices to rise, but is now even more loath to do so as it fights inflation at a near 12-year high.
China spends around $25 billion a year to subsidize such things as oil products, natural gas, electricity and gas, while India spends around $20 billion a year, a Japan trade official said, citing International Energy Agency (IEA) figures.
"SHOCKING" VOLATILITY
Oil prices rocketed more than $10 to a new high above $139 a barrel on Friday, taking this year's gains to 44 percent and continuing a rally that has seen prices rise sevenfold since 2001 as investors see output struggling to keep pace with demand. Bodman warned the world to brace for worse to come, conceding there were no immediate answers.
"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" while demand is rising, Bodman told a news conference.
"There are few things we can do short term."
He also said that increased regulation was not the answer to bringing prices down, despite mounting pressure from U.S. lawmakers to step up oversight of energy markets in the hopes of deterring the flood of new investors and speculators that some blame for inflating food and fuel prices.
The United States, Japan and South Korea -- all members of the IEA -- also urged China and India to work more closely with the IEA as they develop their strategic oil reserves, which Western nations fear they may use to try to influence prices.
Record oil prices have triggered protests across Europe, pushed airlines into the red and forced five Asian countries to cut fuel subsidies, intensifying price pressures.
World leaders are fighting an inflation battle on two flanks, having met earlier this week to seek a solution to the surge in food commodity prices that threatens starvation for millions.
The meetings in Aomori will set the stage for the G8 leaders' summit, to be held on Japan's northernmost island of Hokkaido on July 7-9, where Tokyo is expected to press for a commitment to slash greenhouse gas emissions by 2050.
(Editing by Jonathan Leff and Alex Richardson)
