G-8 worried about food, oil; optimistic on economy

In a communique released after a morning discussion about economic issues, the leaders called on petroleum suppliers to boost production and refining and to increase investment in oil exploration and output over the medium term.

The G-8--which groups the U.S., Britain, Japan, France, Germany, Canada, Russia and Italy--also called for diversifying sources of energy and further efforts to improve energy efficiency.

"We remain positive about the long-term resilience of our economies and future global growth," the communique said, noting that growth in emerging economies remained strong.

"However, the world economy is now facing uncertainty and downside risks persist," it said.

"We express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and increase global inflationary pressure," it said.

Since the G-8 leaders met last year in Germany, the world economy has deteriorated dramatically amid accelerating inflation, a credit crisis and plunging markets. Many experts say the it is in the worst shape since at least the Asian financial crisis of 1997-98.

"You just have to look at stock markets around the world to see how much faith people are putting in these pronouncements from the G-8," said David Cohen, a regional economist with Action Economics in Singapore.

"The markets are braced for stagflation--higher oil prices boosting inflation and dragging down economic growth."

On Wall Street, the Dow Jones industrial average has fallen to nearly two-year lows, while Japan's benchmark Nikkei 225 index just recently suffered a 12-day slide, its longest in 54 years. Most Asian markets fell Tuesday, and major European indices slid more than 1 percent in morning trade on persistent worries about the credit crisis.