Energy ministers split on fuel subsidies

By Osamu Tsukimori and Chikafumi Hodo

AOMORI, Japan (Reuters) - Energy officials from five top consumer nations urged producers to step up investment on Saturday, a day after crude's biggest surge ever, but they offered no new ideas on how to deal with record prices and remained divided on fuel subsidies.

Japan, the United States, China, India and South Korea -- who together guzzle nearly half the world's oil -- said that they had agreed on the need for greater transparency in energy markets and more investment by consumers and producers both, while stopping short of calling on OPEC to pump more crude today.

But a call from the United States for an end to heavy price subsidies that protect many Asian drivers from soaring costs fell on deaf ears, as China and India said they could only raise domestic rates gradually in view of their fragile economies.

On Sunday the full Group of Eight energy ministers will meet amid unprecedented volatility in the oil market and growing public discontent over governments' failure to soften the blow, which worsened with Friday's more-than-$10 surge to a record $139.

U.S. Energy Secretary Sam Bodman pointed part of the blame at cheap fuel in Asia, where fast-growing economies and low prices have helped drive oil's explosive six-year rally.

"We know demand is increasing because a lot of nations are still subsidising oil, which ought to stop," Bodman said.

But India's ambassador later told Reuters it was unrealistic to abandon controls that help protect its 1.1 billion people.

"We as a developing nation are not in a position to completely do away with ... subsidies," said Hemant Krishnan Singh, who is standing in for the oil minister at the meetings.