"Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressure," says a G8 joint statement released on 14 June in Hokkaido, Japan.
Higher energy demand from rapidly developing countries and blocked or difficult access to existing oil reserves are frequently cited as being among numerous structural causes for the oil price hikes.
And food prices are increasingly intertwined with fossil fuel prices, according to the UN's Food and Agriculture Organisation (FAO). There is a "strengthening of linkages among agricultural commodity markets and others, such as those of fossil fuels; biofuels and financial instruments that influence not only the costs of production of agricultural commodities but also the demand for them," the FAO says in a fact sheet on food prices.
Speculators are also being blamed for pushing prices upward. "The recent financial turmoil has revealed the risks posed to the financial system by excessive risk taking and leveraging," the G8 statement says.
Some investors have indeed been benefiting from a "perfect storm" in agricultural commodity markets, with land prices and numbers for certain foodstuffs going "off the charts," says Simon Covat, a trader at the Geneva-based investment firm Gaia Cap.
But the G8, which includes the US, Britain, Canada, France, Germany, Italy, Russia and Japan, warns against using speculators as scapegoats, and says the price hikes are no reason to restrict global trade flows. "We affirm our commitment to an open investment policy and acknowledge that international investment is fundamental to global prosperity. We will resist protectionist sentiment at home and abroad," the statement says.
Relief in sight?
Saudi Arabia over the weekend said it intends to increase its output of crude oil. The announcement caused oil prices to ease slightly to near $134 per barrel, down from nearly $140 per barrel last week.
The Commission, meanhwile, has put out a communication on the issue of rising oil prices, dated 11 June. Among other measures, Brussels is proposing tax breaks and other incentives to ease the short and long-term effects of fuel price rises on the poorest sectors of the EU population (EurActiv 12/06/08).
In order to combat food price increase, Brussels has proposed a further reform of the Common Agricultural Policy and has extended an existing suspension of import duties on cereals until 30 June 2009 in order to increase trade flows in cereals and bring prices down. The Commission has also set up a High Level Group designed to boost competitiveness of the agro-food industry.
'Policy implications' of high oil and food prices will also be discussed at the General Affairs and External Relations (GAERC) Council meeting today and tomorrow (16-17 June) in Luxembourg (EurActiv 16/06/08).
Following the Irish 'no' vote, the Commission is also calling on EU member states to reconnect with its citizens, who are increasingly concerned about rising oil prices (EurActiv 13/06/08).
Truck drivers and farmers are expected to protest over rising fuel prices in Brussels this week.
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