CALGARY, Alberta (Reuters) - Energy ministers from the world's richest countries, gathering later this week in the heartland of the auto industry, will discuss ways to protect fragile economies from energy price shocks just as a wave of Middle East violence has oil markets surging.
Canadian Natural Resources Minister Herb Dhaliwal said on Monday that supply security will top the agenda for the May 2-3 meeting in Detroit of energy ministers from the Group of Eight industrialized powers, largely the biggest energy consumers,
Central bankers and economic agencies worldwide have warned that a long spell of high oil prices is one of the biggest threats to a global economy that is on the mend eight months after the Sept. 11 attacks on the United States.
"I think it's important that we don't have these huge disruptions, with energy prices going up and down, so it will be about how we can deal with having long-term energy security," said Dhaliwal, who is co-hosting the meeting with his U.S. counterpart, Energy Secretary Spencer Abraham (news - web sites).
"It's not good for our economies when we have these huge disruptions."
That could mean discussing everything from sharing new energy efficiency technology among developed and developing countries to boosting support for renewable energy, he said.
European media have speculated talks could include ways to make it easier to open the taps on emergency oil stockpiles.
Besides the United States and Canada, the closest partners on energy trade, the G8 comprises Britain, Germany, France, Italy, Japan and Russia. The gathering is one of a series of ministerial meetings leading up to the summit of G8 leaders in Kananaskis, Alberta, in June.
SURGING OIL PRICES
Oil prices have surged more than 30 percent so far this year. At today's level of more than $27 a barrel, crude has climbed back to pre-Sept. 11 prices as OPEC (news - web sites) -- which pumps a third of the world's oil -- curbed output, economic activity increased and turmoil intensified in the Middle East.
Oil has also reacted to Iraq's signals it could extend an early-April halt of exports to protest against Israeli incursions into Palestinian territories beyond 30 days.
But Iraqi calls to other Muslim countries for an all-out oil embargo have found little support so far.
Analysts stress there is no oil shortage in the major consuming countries.
"If (Iraq's export halt) were to go on for several months, or if another country were to join them, then we'd begin to start putting together a small crisis," said Sarah Emerson, director of Energy Security Analysis Inc. in Boston.
"If the Saudis were ever to do it, which they won't, then it would be a big crisis."
With the exception of net oil exporters Canada and Britain, G8 countries hold strategic reserves as mandated by the International Energy Agency. The IEA recently said members had nearly 4 billion barrels in reserve, or 114 days' worth of net imports. They are obliged to store 90 days' worth.
If access to oil is not threatened, high prices remain the biggest risk to G8 economies. Two weeks ago, U.S. Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) warned of "far-reaching consequences" if prices for energy don't cool off.
One response could be a drop in consumer spending, especially in the United States, which would squelch growth.
"I do believe that high gasoline prices or high natural gas or electricity prices are a big deal to the average consumer," Emerson said. "It makes them feel like they just don't have as much money in their wallets, so they do stop their purchases."
Dhaliwal said discussions on renewable energy will help G8 members address another big G8 issue -- climate change.
However, Green groups hope European and Asian G8 members keep up pressure on Canada to ratify the Kyoto Protocol (news - web sites) on cutting greenhouse gas emissions, said Gerry Scott of the Vancouver-based David Suzuki Foundation.
The prospect has been looking more remote in recent weeks after European countries slammed the door on Canada's hopes to get credits for exporting clean energy to the United States, which walked away from the Kyoto accord.
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