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G-8 hold meeting to fight oil prices.

June 8, 2008 12:00:00 AM PDT
Faced with record-high oil prices, the world's leading economies and oil consumers Sunday pledged greater investment in energy efficiency and green technologies to control their spiraling thirst for petroleum.In a joint statement, energy ministers from the Group of Eight countries, joined by China, India and South Korea, also urged oil producers to boost output, which has stalled at about 85 million barrels a day since 2005, and called for cooperation between buyers and producers.

But with little prospect for a surge in production anytime soon, the focus of Sunday's meeting was on what wealthy nations should do to rein in consumption, while reducing carbon emissions blamed for global warming.

"We also have to address too the demand side of the equation," said John Hutton, Britain's business secretary. "We will do that through new measures to improve energy efficiency (and) accelerate our moves to a new, low-carbon form of energy generation."

The 11 nations, which account for 65 percent of the world's energy consumption, grappled with oil prices that have hit record highs. Prices made a massive 8 percent gain Friday to $138.54 on the New York Mercantile Exchange.

Energy experts say most producers have little ability to expand output. The exception is Saudi Arabia, which is producing about 9.4 million barrels a day and has the ability to increase by about 2 million barrels a day, but has not done so.

The current president of the Organization of Petroleum Exporting Countries, Chakib Khelil, has said that the cartel will make no new decision on production levels until its Sept. 9 meeting in Vienna.

While the nations meeting on Sunday did not pledge specific amounts of money, they said they would set goals in line with International Energy Agency recommendations for a vast expansion of investment in renewable energies and energy efficiency.

For instance, the G-8 countries - the United States, Japan, Russia, Germany, France, Britain, Italy and Canada - pledged to launch 20 demonstration projects by 2010 on so-called "carbon capture and storage," which would allow power plants to catch emissions and inject them into underground storage spaces.

While that technology is still in its infancy, proponents say it could eventually allow the expanded exploitation of the world's abundant supply of cheap coal without polluting the environment and speeding global warming.

There were clear rifts, however, on how to approach another technology promoted by some as an answer to oil dependence: nuclear energy.

The carefully worded joint statement called for assurances on safety and security of nuclear materials, but several nations - the United States, Canada and Britain - said they were determined to build new reactors. Japan also has ambitious nuclear goals.

The IEA, in a report issued last week, estimated the world would have to construct 32 new nuclear power plants each year from now until 2050 as part of an effort to cut global greenhouse gas emissions by 50 percent.

"I don't think it's an unreasonable forecast or estimate," U.S. Energy Secretary Samuel Bodman said of the IEA study. "I think we're really on the verge of a very substantial increase in the number of nuclear power plants."

Germany, however, said it had no plans to join the effort. Jochen Homann, Germany's economics minister, said Berlin had not changed its decision to phase out the use of nuclear power.

The ministers met amid rising concerns that soaring oil prices could trigger global economic troubles. Fanning such fears, both Japan and the United States have announced higher unemployment rates in recent weeks.

"The situation regarding energy prices is becoming extremely challenging," warned Akira Amari, Japan's trade and energy minister. "If left unaddressed, it may well cause a recession in the global economy."

The Sunday meeting followed a statement from five top energy consumers - the U.S., Japan, China, India and South Korea - that warned high prices were a menace to the world economy and more petroleum should be produced. They argued the unprecedented prices were against the interests of both producers and consumers, and imposed a "heavy burden" on developing countries.

The group, however, diverged over oil subsidies. The IEA has estimated that oil subsidies in China, India and the Middle East totaled about $55 billion in 2007.

The United States urged countries such as China to lower oil supports, which buoy demand, while poorer developing nations said removing subsidies could trigger political and economic unrest.

Even wealthier nations feel the need to shield consumers from skyrocketing prices. South Korea on Sunday unveiled a $10.3 billion plan to help ease the burden of high oil prices on low-income consumers and self-owned businesses.

 

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