Germany called for a clampdown on hedge funds by G8 leaders meeting in Scotland last week, but record oil prices seemed to be the main economic concern for the annual summit of the Group of Eight.
Oil prices were hovering near record levels despite news on Tuesday night of a G8 draft communique showing the leaders are set to make an official appeal for more stable oil prices and more freedom for oil companies to invest in oil-rich countries.
“The health of the global economy is a key concern to each of the members of the G8 and to the world as a whole,” said the draft, shown to Reuters on Tuesday and confirmed by other G8 officials on Wednesday as still fully up-to-date.
“But challenges remain, especially persistent global imbalances and high and volatile oil prices,” it said.
Analysts said the expected declarations from the leaders of the G8 club of industrialised nations were a step in the right direction, but would not alter anything in the short run.
US crude futures traded last week just a few cents short of the record price of $60.95 struck in the last few weeks.
“It’s good the G8 are starting to put these processes in place. It’s been a very long time coming and the oil industry has been very under-invested for years,” said Jay Saunders, an oil analyst at Deutche Bank.
The analyst was primarily referring to what was set to be a call for progress on the establishment of a system of global reporting on the state of oil stocks as well as an appeal for more investment in oil production.
A program known as the Joint Oil Data Initiative is due to go live in September in an endeavor to make the workings of the oil market clearer, carrying details of inventories, production and consumption. More than 90 countries are participating in a programme headquartered in Riyadh.
Hedge funds and the yuan
German Chancellor Gerhard Schroeder is pushing for action to clamp down on hedge funds but diplomats say he is unlikely to get any commitment at this stage from other leaders. He was backed by German banks.
German politicians have compared hedge funds to “locusts” after a shareholder revolt by UK hedge fund TCI against Deutsche Boerse’s attempted bid for the London Stock Exchange, a revolt that led to the ousting of top Boerse management.
The main focus of the British-chaired summit at the Gleneagles hotel is climate change and aid for Africa. Two officials confirmed that there was no plan to include any comment on currencies in the economic communique.
They say the basic line remains the same as the one made in February 2004, when finance ministers called for greater flexibility in exchange rate regimes in what as seen as a call to China to ease state controls on the yuan.
Chinese President Hu Jintao is joining the summit with other non-G8 members. The G8 countries are the United States, Germany, Britain, France, Japan, Italy, Canada and Russia.
Britain, pressing for fairer trade with Africa, has floated the idea of rich countries ending subsidies for exports of farm produce by 2010, although it was not clear if it would push for a deadline at the Gleneagles summit, which ended on July 8.
European Commission President Jose Manuel Barroso told a news conference at the summit that the EU had already offered to do this if others such as the United States did likewise, but he did not speak of deadlines.
President George W. Bush said in a pre-summit television interview aired on July 4 that he too was willing to move if the EU and others were.
European Trade Commissioner Peter Mandelson, also speaking in Scotland, said the G8 needed to commit to concluding the so-called Doha Round of free trade talks, which reach a crucial phase at a meeting of ministers in Hong Kong in December. (Reuters)