Finance ministers from the Group of Eight nations said surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy.
The Group of Eight finance chiefs also sent a warning signal to oil speculators, highlighting the inflation threat to the global economy in an attempt to cool red-hot energy prices.
Although the finance ministers said it was unclear how much influence speculators wield over energy markets, their remarks appeared to be aimed at curbing hot-money flows into commodities, analysts said. The G8 – Britain, Canada, France, Germany, Italy, Japan, Russia and the United States called for an investigation involving the International Monetary Fund into the recent wild swings in energy prices.
"It is significant that G8 members put the spotlight on their shared fears over inflation. It is a message to speculators to try to control market conditions," said Ryohei Muramatsu, head of Group Treasury Asia at Commerzbank. Their united front is something "that speculators will find hard to go against", he added.
World oil prices have been on a rollercoaster ride recently, soaring close to 140 dollars a barrel on worries about tight supplies, with some blaming market speculators for aggravating the erratic movements.
High oil and food prices pose "a serious challenge to stable growth worldwide," the G8 ministers said in a joint statement on Saturday.
"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," they added.
Oil prices have surged five-fold since 2003 due to a variety of factors, including turbulence in the Middle East and rising demand in emerging economies such as China and India.
Several of the G8 ministers warned against heaping all of the blame for the latest oil shock on speculators, saying that it would deflect attention from the real problem ' a shortage of energy supply.
US Treasury Secretary Henry Paulson said "all the evidence pointed to supply and demand" as the main cause for the surge in oil prices. "I think there's a danger that if people say 'all this is speculators' then we won't do what we need to do.
"We don't want to misdiagnose the problem," he told a press conference, echoing views from other ministers.
But Italy's Economy Minister Giulio Tremonti argued that surging oil prices were essentially due to speculation and said the G8 should deter such activity by forcing investors to pay higher deposits to play the commodity markets. Even if the G8 does not take action they may have managed to take some of the speculative froth out of energy markets, analysts said. "A statement like this showing concerted efforts constitutes a political risk for markets and is enough to have an impact," said Toshihiro Matsuno, head of research at SMBC Friend Securities in Tokyo.
"Although speculators are not the only factor that have pushed up prices, it is undeniable they play a role.
"Financial leaders are fully aware of that but they cannot blame them since there is little evidence."
But he added that it was unclear exactly how the G8's remarks would affect oil prices as the ministers stopped short of threatening "a decisive response."
Soaring oil prices were the main subject of discussion during the two-day G8 meeting that wrapped up Saturday, eclipsing the US-born credit crunch which was until recently regarded as the main danger to the global economy. Analysts said a weaker dollar appears to have been contributing to the recent rise in oil prices, which are denominated in the US currency.
They said some market players have been buying oil as a hedge against a weaker greenback, which has fallen 13 per cent against the euro in the past year.
With soaring energy costs contributing to US inflation worries, Washington has apparently been increasing efforts to talk up the dollar recently. With central bank chiefs absent, the G8 made no mention of currencies in their final statement.
Paulson reiterated at a press conference that a strong dollar was in US interests, but he stopped short of hinting at possible joint market intervention to shore up the currency, as he did last Monday. "The fact that Paulson did not renew his remarks could be because he was unable to receive co-operation from all the (G8) members," said Matsuno.