Asian powers, US warn oil shock to hit global economy

The United States and Asia's four largest powers voiced concern on Saturday after a record spike in oil price as worries grew that energy costs may derail the global economy.

Oil prices, which have soared five-fold since 2003, posted their highest ever one-day gain of 10.75 dollars to close at a new record of 138.54 dollars in New York after hawkish remarks by an Israeli official on oil producer Iran.

US Energy Secretary Samuel Bodman said that the record oil prices were "a shock" and warned oil producers that it would do them no good if the US economy took a hit.

"It's not good for producing nations to see the US struggling economically (as) they depend on us to be a significant engine in world economic activity," Bodman told reporters ahead of the talks in Aomori, Japan.

Bodman held talks with energy ministers from China, Japan, South Korea about the energy markets. India's oil minister cancelled at the last minute and was replaced by New Delhi's ambassador to Tokyo.

Their talks will be followed Sunday by a meeting of the energy ministers of the Group of Eight industrial powers here in Aomori, a hub of Japan's nuclear energy industry 600 kilometres (370 miles) north of Tokyo.

Japan's energy minister Akira Amari, the chair of the meeting, said that the meeting should send a signal about oil prices.

"This has become a major risk factor for the world economy," Amari said.

"It is very important that we, the five nations that consume half of the world energy, get together and issue a united message on what action we should take," he said.

Meeting with South Korea's Knowledge Economy Minister Lee Youn-Ho, Amari said that he believed crude oil prices were "abnormally high."

"We want to issue a message on this to the world," Amari said.

Lee added: "I don't think the oil prices are at normal levels either. It is fairly questionable whether the world economy will be able to develop further at this level of crude oil prices."

Japan, the world's second largest economy, is nearly entirely dependent on imports for its oil and gas. Its fishing industry recently said the situation had become so severe it was considering a strike this summer.

India's government on Wednesday hiked fuel prices after its state-run oil companies said they had been hit hard by the soaring global prices while having to sell fuels at heavily discounted prices.

The decision triggered angry protests and strikes.

Soaring oil prices have been blamed on a variety of factors including turbulence in the Middle East and rising consumption by emerging economies such as China and India.

Analysts said the sharp spike overnight was a reaction to reported remarks by Israeli Deputy Prime Minister Shaul Mofaz on Iran, a major oil producer.

Mofaz, a former defence chief, warned that the Jewish state would attack Iran if it continued its alleged nuclear weapons drive, although he stressed such an operation could only be conducted with US support.

Despite the spike, Bodman said he did not see oil prices as a "crisis" and denied the need for tighter regulations of oil markets.

Climate change will also be on the agenda for the 11 countries, which together release 65 percent of the carbon dioxide emissions blamed for global warming.

The climate will be a major issue when the leaders of the G8 hold a summit from July 7 to 9 in Japan's northern resort of Toyako.

The International Energy Agency said in a report Friday that no single form of energy or technology could solve the problem alone, calling for increased use of carbon dioxide capture and storage, renewable and nuclear energy and better energy efficiency.