Surging oil prices on minds of G-8 officials

Officials from the Group of Eight ended talks in Osaka, Japan, on Saturday by saying record fuel and food costs threaten to spur inflation. They also pose a “serious challenge” to growth, eclipsing the credit squeeze, the ministers said.

“Commodity prices have powered ahead of the financial crisis to become the number one priority of international policy makers,” said Marco Annunziata, chief economist at Unicredit Markets and Investment Banking in London. “Stagflation is clearly the underlying, unspoken concern.”

After acknowledging policy making is “more complicated,” the ministers' apprehension about an inflation outbreak may mount this week. Economists forecast reports to show consumer prices last month rose the most since 1997 in the U.K. and the fastest in 16 years in the euro area, while U.S. producer prices are predicted to have gained 1 percent from April.

The G-8 officials didn't propose any new policies, apart from promising to take “appropriate actions.”

They repeated their call of the past four years for producers to pump more crude and consumers to use it more efficiently.

The ministers met after the price of oil doubled in a year to an unprecedented $139.12 a barrel on June 6.

Costs of foods such as wheat and rice have set records this year.

More expensive commodities create a dilemma for officials by sapping growth and spurring inflation, forcing them to decide which problem to address. The Organization for Economic Cooperation and Development this month predicted the weakest growth since 2002 this year and the fastest inflation in seven years.

“The predominant concern is the inflationary effect that oil in particular and also food prices are having,” U.K. Chancellor of the Exchequer Alistair Darling said. Deputy German Finance Minister Thomas Mirow said oil's rise means “an enormous withdrawal of purchasing power.”