Sept. 23 (Bloomberg) -- The new hurricane bearing down on the U.S. Gulf Coast is the latest evidence the Group of Seven industrialized nations must reduce risks to global energy supplies, G-7 officials said.

Hurricane Rita ``points out just how close to the edge we are, how we have absolutely no spare capacity on refining and distribution in North America,'' Bank of Canada Governor David Dodge told reporters yesterday in Toronto.

G-7 officials meet in Washington today as soaring energy costs threaten global growth. Oil prices rose more than 40 percent in the past year, stoking inflation, adding to business costs and damping consumer spending. Producers are struggling to keep up with demand from growing economies in China and the U.S., which hasn't built a new oil refinery in almost 30 years.

``Oil is going to be the most important thing for them to talk about,'' Bernard Connolly, global strategist at Banque AIG in London, said in an interview from London. Richard Clarida, a former chief economist at the U.S. Treasury, said energy prices would be the ``central element'' of the meeting.

G-7 officials will focus on increasing supply and improving efficiency, Tim Adams, the U.S. Treasury's undersecretary for international affairs, told reporters on Sept. 21. U.K. Chancellor of the Exchequer Gordon Brown said last week he would come to Washington with a ``five-point plan'' that includes more production, alternative energy sources and aid for poorer countries hurt by the price gains.

No Effect

Economists including Michael Mussa, former director of research at the IMF, and Holger Schmieding, co-head of European economics at Bank of America in London, said the talks would have little effect. While the G-7 countries make up two-thirds of the world's economy, they account only for about 16 percent of oil production and just 5 percent of reserves.

The group, which includes Japan, Germany, France, Italy and Canada, has tried before to tackle energy costs. In May 2004, with oil at about $40 a barrel, the G-7 issued what Brown called a ``tough'' statement aimed at lowering prices. Oil prices fell briefly, only to double in the next year as demand from growing economies burned up supplies.

``In the short term, they can't do anything'' about oil prices, John Manley, a former Canadian finance minister, said in an interview from Toronto this week.

Dodge said the supply disruptions from the Gulf Coast hurricanes will ``end up being a constraint on growth.'' Economists at investment banks such as Morgan Stanley & Co. trimmed their growth forecasts after Hurricane Katrina pushed oil prices to a record $70.85 a barrel in New York this month.

Discussion Topics

U.S. Treasury Secretary John Snow is scheduled to start the meetings at noon Washington time today with a working lunch that will include Brazil, China, India, Russia and South Africa. Private meetings among the G-7 will follow. Snow has scheduled the closing press conference for 6:30 p.m.

The meetings will also feature discussions of the world economy, global trade imbalances and ways to cut off financing for terrorists, Adams said.

Not everyone thinks the G-7's efforts to curb energy prices have been futile.

John Taylor, the U.S. Treasury's undersecretary of international affairs from August 2001 to April, argues the G-7 has had some success restraining oil prices. The group's past calls for clearer data on oil inventories reduced uncertainty and had a ``mitigating'' effect on prices, Taylor said in an interview from Palo Alto, California, where he teaches economics at Stanford University.

More Important Issues

The G-7's emphasis on oil is misplaced, said Robert Rubin, chairman of Citigroup Inc.'s executive committee and Treasury secretary under former President Bill Clinton. Rubin said world leaders should focus on more important issues, such as the U.S.'s record trade and budget deficits, weak economic growth in Europe and Japan, and integrating China and India into the world economy.

``We are at a critical juncture with great strength and enormous challenges we're not meeting,'' Rubin said.

The IMF this week pared its forecast for global economic growth next year to 4.3 percent from 4.4 percent in April and said governments still have a ``considerable way to go'' to combat global imbalances.

To contact the reporters on this story: Kevin Carmichael in Washington at kcarmichael@bloomberg.net; Simon Kennedy in Washington at skennedy4@bloomberg.net

Last Updated: September 23, 2005 00:04 EDT