G8 Worries About Commodity Shock

OSAKA, Japan -- The world's richest nations warned on Saturday that soaring commodity prices might slice into economic growth, but shrank from offering any plan to calm markets or quell protests over the cost of fuel and food.

Currencies were not discussed in a meeting of G8 finance ministers in Osaka, Japan, after a string of tantalizing comments about a weak dollar's role in inflation, and analysts said the currency would likely dip Monday.

An Italian push for regulation to snuff out speculation in oil futures ran into U.S. and British resistance.

Most ministers appeared more worried about slowing growth in economies hit by a credit crisis than about rising prices, just as most G8 central banks gird up to fight inflation.

"Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and and may increase global inflationary pressure," the ministers said in a communique.

U.S. Treasury Secretary Henry Paulson said costly oil could extend a U.S. slowdown; the International Monetary Fund talked of prolonged global economic weakness; and European Union Economic Commissioner Joaquin Almunia warned of 1970s-style stagflation in an interview with a Japanese newspaper.

The Group of Eight ministers acknowledged the difficulty of supporting growth after a U.S. housing slump triggered a global credit crisis. The risk of record oil and food prices percolating into wages and other costs had made "policy choices more complicated," they said.

The ministers, preparing for a summit of G8 leaders next month, aimed to tackle the threat of inflation from surging commodity prices, especially oil.

G8 countries, mostly importers of crude, wield little influence over oil markets that are driven by demand growth in India and China and concerns about supplies. But they can try to arrest a slide in the U.S. currency that has prompted investors to buy oil futures and other commodities to hedge dollar risks. The Italians pushed for rules that would make trading in oil futures more expensive to discourage speculation, drawing a cool response from the United States and Britain, home to big oil trading markets.

"At its heart, this run-up in price reflects long-term trends in global supply and demand and strong economic growth coinciding with a period of minimal investment in oil production," Paulson said.

Finance Minister Alexei Kudrin said the weakening dollar shouldered some of the blame for high oil prices.

"The U.S. dollar depreciation was actually one of the reasons oil prices went up," he said.

"Earlier this week, the Americans said they would take some measures to make a strong dollar, but that was not in the discussions," he said.

As a compromise, ministers asked the IMF to look into the drivers of oil's rise toward records near $140 a barrel.