XIANGHE, China (Reuters) – The G20 group of rich and developing nations sounded the alarm on Sunday over high oil prices but barely touched on the role a stronger yuan could play in easing world economic imbalances.
Finance ministers and central bankers from the diverse group, expressing concern about a rising tide of protectionism, also stressed the need for concrete results at world trade talks in Hong Kong in December.
"We are concerned that long-lasting high and volatile oil prices could increase inflationary pressures, slow down growth and cause instability in the global economy," the G20 said in a statement after two days of talks at a sprawling resort near Beijing.
The world”s largest oil consumer, the United States, and its biggest oil producer, Saudi Arabia, were among the signatories to the statement, which vowed to promote energy saving and alternative sources of energy as well as to reduce oil subsidies.
Saudi officials said they hoped a meeting of energy ministers in Riyadh in November would bring about the greater transparency in world oil markets that Western policy makers say is lacking.
Caio Koch-Weser, Germany”s deputy finance minister, said substantial investment was needed in exploration and in refining capacity, while for consumers energy efficiency and conservation was now at the forefront.
"What Kyoto may not have done in the U.S., prices at the pump will," Koch-Weser said, referring to America”s failure to curb energy consumption in keeping with the spirit of the Kyoto Protocol on reducing greenhouse gas emissions.
The world economy has shown remarkable resilience so far to the surge in oil prices. Benchmark U.S. light crude futures hit a record $70.85 per barrel in August, up more than 60 percent from the end of 2004. They closed on Friday at $62.63.
The head of the International Monetary Fund, Rodrigo Rato, reaffirmed the Washington-based lender”s forecast that global growth next year would match this year”s 4.3 percent expansion but warned that oil was a major threat.
Jean-Claude Trichet, the governor of the European Central Bank, said the ECB had not yet seen any spillover from higher oil bills into demands for wage rises.
In the absence of such second-round effects, which he called "our worst enemy," Trichet said the ECB”s interest rates were still appropriate. The bank has held its main short-term rate for the 12-nation euro zone at 2 percent for two years.
But Trichet, too, said the risks were rising: "It is extremely important not to have second-round effects and that is why we consider that strong vigilance is of the essence."
In a further illustration of policy makers” preoccupation with oil prices, Australia will put energy security for fast-growing powers such as China and India at the heart of the G20”s agenda when it chairs the group next year.
"Those economic powers, naturally, are going to be looking for resources and energy security to drive industrialization and economic growth," Australia”s treasurer, Peter Costello, said. "This will become a key question for the international community."
A key question right now for financial traders is how quickly China will make good on its promise to let the yuan trade more freely. The currency has risen just 0.3 percent since Beijing revalued by 2.1 percent in July and abandoned an 11-year-old dollar peg in favor of a managed float.
Traders had speculated that the G20 meeting would be a forum for Washington in particular to ratchet up its pressure for a faster rise in the yuan to head off pressure from law-makers alarmed by China”s ballooning trade surplus.
In the event, Chinese President Hu Jintao headed off any debate in an opening speech calling for major countries to keep their exchange rates reasonably steady.
With European ministers recommending that quiet advice works better than megaphone diplomacy, U.S. Treasury Secretary John Snow made a significant change of tack by saying a free-floating yuan was just one of many policies Beijing needed to implement as it opens its economy more fully to market forces.
U.S. officials also emphasized the need for China to boost domestic demand so growth relies less on exports, thereby helping to iron out the trade imbalances overhanging the world economy.
"If you truly want to deal with these imbalances, bilaterally or multilaterally, you have to focus on more than just the currency," Treasury Under Secretary Tim Adams said on Saturday.