Oil Topping $130 May Slow Global Economy, Japan Warns (update 1)

By Megumi Yamanaka and Yuji Okada

June 8 (Bloomberg) -- Oil prices topping $130 a barrel may slow global economic growth, Japan's trade minister said, urging the world's biggest energy consumers to cut back on demand.

``Assuring energy security is now the top priority of all countries,'' Japan's Trade Minister Akira Amari said today at the opening of a meeting of energy ministers from the Group of Eight industrialized nations, plus China, India and South Korea, in Aomori, northern Japan.

Crude oil climbed more than $10 to $138.54 a barrel in New York on June 6, prompting U.S. Energy Secretary Samuel Bodman yesterday to describe the market as ``shocking.'' Rising oil prices may slow the global economy this year, which the World Bank forecast in January would expand at a more gradual pace of 3.3 percent compared with 2007, citing a poor U.S. outlook.

``U.S. economic growth will probably fall below 1 percent if oil stays at about $140 a barrel,'' Naka Matsuzawa, Chief Strategist at Nomura Securities Co. in Tokyo, said by phone today. ``An economy recession in the U.S. is highly likely to lead to a recession in other developed countries.''

U.S. Fed policy makers in April trimmed their economic growth projections for this year by about 1 percentage point to between 0.3 percent and 1.2 percent.

Advancing oil prices ``will add to the downward pressure on global growth,'' the International Monetary Fund's First Deputy Managing Director John Lipsky said in a Bloomberg interview on the sidelines of the International Economic Forum in St. Petersburg, Russia, yesterday.

Economic Slowdown

China, Japan, India, South Korea and the U.S. expressed ``serious concerns'' about oil prices and called on producers ``to increase investment to keep markets well supplied,'' according to a joint statement issued after energy ministers and officials from the five nations met yesterday.

South Korea's government said today it will provide 10.5 trillion won ($10.1 billion) in tax rebates and subsidies to help consumers and businesses cope with surging energy costs.

Australian Prime Minister Kevin Rudd urged the Organization of Petroleum Exporting Countries, which produces more than 40 percent of the world's oil, to boost supplies.

``Every head of government across the world is dealing with this challenge now and it goes to global oil supply,'' Rudd told Network Ten's Meet the Press program today. ``OPEC needs to open the production lines to a greater extent.''

OPEC has no plans to change output before its scheduled meeting in September, Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said on May 22 in a phone interview from Doha.

Conservation Targets

Top officials from 11 countries are gathering in Aomori today to draft measures to cut oil demand and reduce greenhouse gases blamed for global warming. G-8 environment ministers on May 26 pledged to halve emissions by 2050 and want China and India to step up energy-saving efforts.

``China and India are key,'' Amari said earlier this week. ``Without commitment from those two nations, any strategies will be meaningless.''

The G-8 -- the U.S., Japan, Canada, Germany, France, the U.K., Italy, and Russia -- may try persuading China and India to join the International Partnership for Energy Efficiency Cooperation to be set up this year and agree to numerical targets for conservation. The 11 nations account for about two- thirds of energy consumption and gas emissions.

``China has already set its energy-conservation target, so it's unlikely to resist establishing new targets,'' said Koichi Sasaki, a senior researcher at the Institution of Energy Economics in Tokyo. ``India is more reluctant to introduce numerical aims for conservation. It regards it as too early because its economy is still taking off.''

India and China

India's economy expanded 9 percent in the year ended March 31, the least since 2005. Growth may slow further to about 8.5 percent in the current financial year, Finance Minister Palaniappan Chidambaram said in New Delhi on May 30. China's gross domestic product is expected to rise 10 percent, according to 17 analysts surveyed by Bloomberg.

``Energy and environmental issues are like the head and tail of a coin and we must tackle them as one problem,'' Amari said.