G-8 Says `Volatile' Oil Prices Pose Risk to Growth

Finance ministers from the Group of Eight leading industrial nations said higher oil prices are a threat to the global economy's best performance in more than three decades.
``Risks for the outlook have abated, but high and volatile energy prices remain a concern and we will remain vigilant,'' the G-8 said today in a statement after a two-day meeting in Potsdam, Germany. ``Global growth remains robust and it is more balanced across regions and within our countries.''
Oil prices have risen by almost a fifth in the past four months. Today's statement contrasts with the communique from the G-8 meeting in February, which expressed optimism about ``lower'' energy prices, and that from the last month's meeting, which made no reference to their impact on the economy.
German Finance Minister Peer Steinbrueck chaired the gathering of officials from France, Canada, the U.S., the U.K., Japan, Italy and Russia. Central bankers didn't attend and the statement made no reference to currencies.
The price of oil was $64.94 per barrel on May 18, up from around $50 per barrel in January.
Optimistic
Steinbrueck said he's optimistic that the global economy is becoming less dependent on the U.S. for growth and is less at risk from lopsided flows in trade and investment.
Global imbalances ``aren't our main concern at the moment because we're dealing with an excellent economic development,'' he said in an interview. ``We're not underestimating certain risks, but they're not as important today as they were two or three years ago.''
Growth in the 13-nation euro region and Japan is helping to compensate for a slowdown in the U.S. and China yesterday said it's widening the yuan's trading band amid trade tensions with the U.S. The International Monetary Fund said last month the euro region's economy will expand 2.3 percent in 2007 and outpace the U.S. for the first time since 2001.
The Washington-based lender forecast growth of 2.2 percent in the U.S. and 2.3 percent in Japan.
China yesterday took steps to allow its currency to appreciate before officials meet U.S. Treasury Secretary Henry Paulson next week. Some U.S. lawmakers accuse China of keeping the yuan artificially low to stimulate exports.
The People's Bank of China yesterday announced it will let its currency rise or fall 0.5 percent a day, up from 0.3 percent and the one-year benchmark lending rate was raised for the fourth time since April last year .
Some G-8 officials urged China to go further. ``We concurred that we will keep urging China to move to make its currency more flexible,'' said Japanese Finance Minister Koji Omi after today's talks concluded.
The G-8 ministers also said in their statement that the global hedge-fund industry ``should review and enhance existing sound-practices benchmarks'' for hedge-fund managers to limit risks of ``systemic'' crises in financial markets.