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Demand Growth, Not Speculators, Behind Oil-Price Surge, U.K. Says

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Demand Growth, Not Speculators, Behind Oil-Price Surge, U.K. Says

June 13, 2008

LONDON — The recent rise in prices of oil and other commodities isn’t being driven by speculation, but rather by supplies not keeping up with rising demand, the British government said.

The report was released Thursday, as governments in Europe and around the world are scrambling to find ways to address complaints from an angry public about high oil prices. However, there is still little consensus over possible remedies — or even the cause of the price surge.

Italy, for example, planned to present a meeting of global financial officials Saturday with a plan to curb oil and other commodity prices by targeting market speculators. The Organization of Petroleum Exporting Countries has also traced the soaring oil price to speculators — even as it declines to boost its production to address the problem.

French President Nicolas Sarkozy, meanwhile, has called for a Europe-wide reduction in fuel taxes.

The report from the British government suggested that the Italian plan wouldn’t receive a sympathetic hearing at the Group of Eight meeting in Osaka, Japan, on Saturday.

“Investment activity in the financial markets is not driving prices, although in following them it could in the short term be having a small and transitory impact,” the report prepared by the British Treasury said.

British Prime Minister Gordon Brown said Thursday that he would discuss oil issues with U.S. President George W. Bush, who was to arrive in London on Sunday as part of his European tour. Mr. Brown also told a news conference he would attend a June 22 gathering of oil producers and consumers in Saudi Arabia, but said he didn’t expect short-term production changes.

The U.K. report said governments should cooperate to ease the short-term impact of higher commodity prices, and take long-term steps to “address underlying causes of inefficiency in the commodity markets, including action against protectionism.”

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