THE RISE in food and oil prices could "severely weaken" the economies of up to 75 developing countries, including Pakistan and Indonesia, the International Monetary Fund yesterday said in its first broad assessment of the crisis.

Dominique Strauss-Kahn, IMF managing director, warned that some countries were now at "a tipping point" because of the double impact of rising food and oil prices. He said that if agricultural commodities prices continued to rise, even if oil prices remained stable, "some governments will no longer be able to feed their people and at the same time maintain stability in their economies".

The warning is a sign that policymakers are increasingly concerned about the impact of the food and fuel crisis, not just in humanitarian terms but also its effect on economic and political stability. The problem will be high on the agenda at the G8 summit this month.

In its assessment of the impact of the commodities crisis, the IMF warned that "a prolonged period with prices around or above current levels will place serious strains on the balance of payments of many countries".

The IMF's warning came as commodity prices surged more than 30 per cent in the first half of the year, boosted by record oil and food costs.

Meanwhile, the Irish-born head of one of the world's biggest oil companies has defended the industry against allegations of profiteering. Chevron chairman and chief executive David O'Reilly acknowledged that huge increases in fuel prices were making life difficult for millions of Americans, but he defended the record profits recorded by oil companies like Chevron.

"Our profits have been actually as a company have been relatively flat, in terms of per cent per revenue. It's about 7 per cent on the base as a profit margin, 7 per cent profit margin, which is very close to the industry average. Now you've got to keep in mind that the numbers are very big. We made $18 billion of profit last year but we're investing $23 billion of money this year in new supplies," he said.

Mr O'Reilly rejected calls for oil companies to take a cut in profits by lowering petrol prices, arguing that a price cut would "send the wrong signal to the market" and discourage investment in new supplies.

"I think if there's guilt, the guilt is that we should look in the mirrors and ask ourselves have we been too complacent about energy," he said.