AOMORI, Japan (Reuters) - Group of Eight energy ministers looked inward for solutions to record oil prices on Sunday, touting the need for domestic efficiency rather than piling pressure on a resistant OPEC to pump more crude.
Oil prices posted their biggest ever one-day surge on Friday, leaping more than $10 to a record high above $139 a barrel.
Soaring oil costs dampen global economic growth, worsen inflationary pressure and raise the risk of more protests by fishermen, truck drivers and others whose livelihoods are under threat.
Caught between mounting popular discontent at home and the need to invest billions in greener energy to cut world carbon emissions, the G8 ministers offered few new ideas for heads of state to consider at their summit next month.
“(On) energy efficiency and energy diversification, we all recognize that tremendous progress is being made but more has to be done,” said Gary Lunn, Canada’s Natural Resources Minister.
In a group ranging from top oil consumer the United States to No. 2 exporter Russia, few had expected the meeting to result in measures that could stem oil’s six-year rally, which has gathered pace this year as investors fear the world will struggle to produce enough crude to meet demand in the decades ahead.
However, their message appeared to reflect a growing acceptance that consumer nations must find ways to temper their own demand by focusing on technology, conservation and diversification rather than hounding OPEC to pump ever more oil, as Australia’s prime minister urged earlier in the day.
The group of G8 ministers plus non-G8 guests China, India and South Korea, which together consume two-thirds of the world’s energy, said they shared “serious concerns” over the cost of oil.
Analysts said they were on the right track.
“This is the right development and this will...improve the supply and demand balance in the medium- and long-term, but it won’t have an immediate impact on prices,” said Toshinori Ito, senior analyst at UBS Securities Japan.
“Oil prices are surging not because of a supply shortage, but because of massive liquidity,” Ito said, referring to the influx of financial funds into markets, helped by low interest rates.
The G8 comprises the United States, Britain, Canada, France, Germany, Italy, Russia and Japan.
Oil has doubled in a year and risen 44 percent since January, forcing developing countries such as Indonesia and India into unpopular fuel prices rises while richer nations ponder how to soften the blow of soaring energy costs for the vulnerable.
South Korea on Sunday became one of the first countries to cave in to public pressure, announcing a $10 billion one-year handout to help 14 million low-income earners.
The issue is certain to hang over G8 leaders when they meet in Japan early next month, a summit where host Japan hopes to win backing for a target to halve carbon emissions by 2050.
The energy ministers agreed on the need for more large-scale carbon capture and storage (CCS) projects that bury emissions from power plants, a cornerstone of the International Energy Agency’s call for a $45 trillion energy “revolution”.
“The time for talking is over. We have to implement this,” British Business Minister John Hutton told Reuters in an interview, referring to the IEA goals.
The IEA report released on Friday, commissioned by G8 leaders three years ago, said the world would need to effectively “decarbonize” the power sector by building dozens of billion-dollar CCS plants over the next 40 years, although world governments remain at odds over who should foot the bill.
About 190 nations are racing to craft a framework by the end of 2009 to succeed the Kyoto Protocol, a U.N. pact aimed at fighting climate change by mandating emissions curbs. The first phase, which ends in 2012, commits only 37 industrialized nations to emissions curbs between 2008-12. The aim of the replacement pact for Kyoto is to bind all nations to cuts.
Not everyone has given up hope on the supply side.
Speaking before a trip to Japan on Sunday, Australian Prime Minister Kevin Rudd urged the G8 to “apply the blow-torch” to the Organization of the Petroleum Exporting Countries, but G8 energy ministers appeared unwilling to take that route. OPEC officials have repeatedly rebuffed such calls over the past year, saying that the market remains well-supplied and that soaring prices are beyond its control.
Top-exporter Saudi Arabia has said it will increase output this summer to help meet peak demand, but oil prices have carried on rising as investors rush into commodities as a hedge against the dollar’s fall and inflation.
In the end, some ministers conceded they were powerless to fight the flow of financial capital.
“There are relatively few things we can do short term,” U.S. Energy Secretary Sam Bodman told reporters on Saturday.
Editing by Hugh Lawson and Jonathan Leff