UPDATE 1-Merkel says very concerned about inflation

(Adds comments on oil, gas prices, background)

BERLIN, July 1 (Reuters) - German Chancellor Angela Merkel said on Tuesday she was "very concerned" about recent inflation developments and that she would lobby at next week's G8 summit and elsewhere for steps to be taken to rein in energy costs.

"On the one hand we have economic growth and a much improved employment situation," Merkel said at the annual congress of German farmers in Berlin. "On the other, we have accelerating inflation due to rising energy and food prices which causes us great concern and which of course eats up a large part of the (economic) upswing for many people," she added.

Merkel said it was the German government's task to see that supply and demand for crude oil and natural gas were brought back to "a sensible balance".

"I am convinced of that and therefore I will work toward that at the G8 summit and elsewhere and you will be happy when the fuel price comes down," she said, adding that cutting taxes on fuel was the wrong way to deal with the problem of surging energy costs. The Group of Eight summit takes place in Hokkaido, northern Japan, on July 7-9.

Oil prices hit a record high of more than $143 per barrel on Monday, and food prices have climbed over much of the past year, helping push German inflation to its highest level in nearly 15 years in June.

The national gauge of consumer prices (CPI) published on Friday showed inflation climbing to 3.3 percent, the highest rate since December 1993, from 3.0 percent in May.

Economists said the figures were likely to dampen already lacklustre consumer spending, and keep pressure on the European Central Bank to raise the cost of borrowing.

German Economy Minister Michael Glos said on Tuesday that improving energy efficiency and increasing oil production were two ways in which oil prices could be brought under control.