Financial leaders of the Group of Eight countries will face the burdensome task of dealing with the uptrend in oil
prices when they meet in New York this weekend to discuss the global economy.
Officials from Britain, Canada, France, Germany, Italy, Japan, Russia and the United States are set to reassess how
to ensure a sustainable global economic recovery in line with the policy coordination agreed at the meeting of the G-7
G-8 minus Russia in April.
Yet within a month of the G-7 adopting a statement declaring a stronger global economic recovery, the issue of crude
oil prices is looming larger as a major threat to the generally bright outlook for the world economy.
Despite growing jitters over the adverse impact of the uptrend in crude oil prices, however, speculation has mounted
that the G-8 will not dig deeply into the issue at the meeting, which is to lay the groundwork for the G-8 summit in Sea
Island, Georgia, next month.
A Japanese Finance Ministry source said the uptrend in oil prices is likely to be one of the G-8 topics on Saturday
and Sunday as a destabilizing factor for the global economy.
But he indicated the issue will not take center stage, saying the basic trends of energy costs and other risks
surrounding the global economic situation have not changed during the past month.
In their April meeting, the G-7 touched on the issue briefly in a statement saying, "Although risks remain, such
as energy prices, overall the balance of risks to the outlook has improved."
Some critics referred to possible political ramifications involving G-8 members such as Russia, a major oil-producing
country, as a potential factor that might limit the coming debate.
Crude oil futures have soared amid the chaos in the Middle East and growing demand from China and the United States.
Earlier this week, the key June West Texas Intermediate contract rocketed above $41 to its highest level since crude
futures trading started on the New York Mercantile Exchange in 1983.
A few days after the WTI hit an all-time high, the Japanese government issued the latest of recent upbeat economic
data that showed a better-than-expected 1.4 percent economic expansion in real terms in the January-March period for 5.6
percent annualized growth.
Some market analysts fear the crude oil factor could derail the nation's economy from its track to full-fledged
recovery.
"If this trend continues for a year, it would push down Japan's economic growth rate by 0.5 percentage
point," said Takahide Kiuchi, a senior economist at Nomura Securities Co.
Kiuchi added that Japan also must look into indirect influences from overseas economies, especially the United States
and China, two major powers seen as affected most by higher crude prices.
In parallel with the G-8 financial meeting, oil ministers of the Organization of Petroleum Exporting Countries are
scheduled to hold informal talks on the sidelines of a meeting of the International Energy Forum in Amsterdam.
U.S. Treasury Secretary John Snow said Tuesday the administration of President George W. Bush does not intend to tap
the country's Strategic Petroleum Reserve for the purpose of lowering oil prices.
Snow said the country's oil reserves are designed to be used for "genuine emergencies" and expressed
hope that OPEC would respond to the circumstances "by expanding quotas and increasing production."
Last week, U.S. economist Fred Bergsten suggested a need for the G-7 industrial powers to tackle the crude oil price
issue.
Bergsten, who served as assistant secretary for international affairs at the U.S. Treasury from 1977 to 1981, said in
an interview with Kyodo News that the world's leading economies should send a message to OPEC asking the oil cartel
to adjust its production quotas.
In the upcoming New York gathering, the basic tone of G-8 debate will likely follow that of discussions at last
month's G-7 talks.
The key message is that accelerated reforms are needed to make the current economic growth sustainable.
Also on the agenda will likely be a range of economic issues under the U.S.-led initiative to support reform efforts
in the Middle East, including combating terrorist financing and measures to encourage burgeoning small businesses in the
region.
Bush is seeking to launch the Greater Middle East Initiative that also embraces North Africa and countries such as
Afghanistan, Pakistan and Turkey at next month's summit.
It appears that currency issues are out of the main picture this time, as was the case at last month's G-7
gathering in Washington, particularly because central bank chiefs are not invited this time.
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