Record surges in crude prices have propelled the world into an era in which oil may never be cheap again and energy security will become the foremost concern of governments everywhere, the G8 heard yesterday.

With oil hovering just below $140 a barrel, an unprecedented gathering of the world’s most voracious energy consumers ended in Japan by expressing concerns about prices. It also tacitly admitted that the old rules of energy markets must be torn up if the world was to avoid a crisis.

As the meeting came to close, in Tehran a big supplier said that prices would move higher yet. Mohammad Ali Khatabi, Iran’s Opec representative, told the state broadcaster that he expected oil to reach $150 a barrel by the end of the summer.

Energy ministers from the Group of Eight (G8) industrialised nations, joined by their counterparts from China, India and South Korea, representing 65 per cent of global energy demand, described the tone of this year’s meeting as “fundamentally different” from previous occasions.

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BACKGROUND

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• Oil price leap fuels stagflation fear

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Instead of presenting its usual united but ineffectual demand for increased oil production to Opec with the aim of reducing prices, discussions focused on how best to curb demand.

“If we leave this situation as it is, it could lead to a recession of the world economy,” Akira Amari, the Japanese Energy Minister and host of the meeting, said. That meant, he added, that energy security, including the stability of the oil market, had become one of the top priorities for every country.

Andris Piebalgs, the European Energy Commissioner, said that the high oil price was not a passing phase, adding that “no economy should gamble on a potential return to low prices”.

Sam Bodman, the US Energy Secretary, described the price spike on Friday, when a barrel of benchmark US light crude rose $10, as a shock and said that similar price volatility lay ahead. He conceded that there were relatively few things that could be done in the short term. There was also disagreement on protecting consumers from high oil prices. The United States led calls for developing world subsidies to be removed to help to curb demand. There were riots in India last week when price increases were passed on to consumers.

John Hutton, the Business and Enterprise Secretary, told The Times that the oil market was no longer “responding to price signals”, although the G8 meeting stopped short of any firm policy statements on the role of speculators in energy markets.

Mr Hutton also ran into opposition from Germany over the Government’s belief that it was time for a global swing into nuclear energy to curb reliance on hydrocarbon fuels.

There was also criticism of the European Central Bank for having a role in Friday’s oil rally. José Luis RodrÍguez Zapatero, the Spanish Prime Minister, blamed the unprecedented jump in crude prices on Friday on the Bank and urged Jean-Claude Trichet, its President, to be “more prudent” in statements on interest rates. Mr Trichet’s hawkish comments undercut the dollar and appeared to be one reason for Friday’s rally.

The issue of financial speculation in oil markets will be addressed this week when regulators of the world’s markets meet in Washington to discuss how best to stamp out manipulation that they believe could be partly responsible for record oil prices.

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