Gordon Brown promised yesterday that he would make the high prices of oil and food important areas of discussion in the forthcoming EU Council in Brussels and the G8 Summit scheduled for early July.
Mr Brown also said that later this month he will jointly launch a summit in Saudi Arabia with King Abdullah on the oil crisis. The leaders of oil-producing nations and consumers will be invited, although US President George Bush has indicated that he will not attend.
Mr Brown told reporters at his monthly press conference that "we will continue to work closely with the Saudi government to bring oil prices down to sustainable levels. This can only be done through dialogue. I have proposed to the King that, if necessary, I will be happy to convene a follow-up summit at heads of government level, and have offered London as a venue."
The Prime Minister added that the issue of rising costs was "a real problem" to be dealt with "on the global stage". However, he conceded: "I am not going to Jeddah expecting there is going to be a short-term change in production."
Oil prices have surged around 40 per cent since January, and now stand at around $135 a barrel. They have more than quadrupled since 2004.
Yesterday a bleak short-term outlook for oil supply was confirmed by Chakib Khelil, president of Opec and the Algerian oil minister, who ruled out the possibility that the group will raise output to curb record prices when it meets consuming nations in Saudi Arabia later this month. "Supply is more than enough, there won't be a change," he said.
Mr Khelil dismissed western arguments, notably put forward on Tuesday by BP, that supply and demand, rather than speculators, are behind the surge in oil prices to more than $130 a barrel. Tensions between the United States, Israel and Iran and the weakness in the dollar were also blamed for the oil bubble. Saudi Arabia recently also said that the price of a barrel was "unjustified by market fundamentals".
The Treasury yesterday published its own analysis of the commodities market, which, according to the Chancellor, Alistair Darling, "sets out Britain's vision for the required international action to enable efficient and effective global commodity markets, and sets the framework for setting the international community's response".
The Treasury makes no prediction for the oil price of its own, but its survey of independent experts suggests a medium-term price of about $103, rather than the $83 forecast as recently as the Budget in March.
The Treasury's paper says that, taking commodities as a whole, "continued population growth and rising incomes are driving demand" and "supply will face continued pressure to keep up".
It adds: "Prices are likely to remain higher than their historical averages, if lower than today's levels, with continuing and perhaps more frequent shocks, driven by continuing strong demand and a continuing slow supply response."
The Treasury view appears to be that speculation has not been a major factor pushing the oil price higher. Rather, "it is more likely that wider uncertainty about fundamentals in the commodities market and tight supply conditions are driving price levels and volatility in the market."
The Treasury points out that the commodities boom is also pushing prices and interest rates higher in the "Brics" – Brazil, Russia, India, China, and otherfast-emerging economies. India, for example, was yesterday forced to increase interest rates to combat rising inflation.Reuse content