Oil prices rise again

Last Modified: 29 Oct 2007
By: Faisal Islam

Oil prices hit an all-time high with a barrel breaching $93 at one point.

Some blame this year's relentless price increases on Opec not increasing production.

Others point to rapid industrialisation in China and India.

Whatever the cause, many believe a price of $100 dollars per barrel is now imminent.

Until now, Western economies have shrugged off this price surge, but how long will that last?

Back in May 2003, a barrel of oil cost just over $26.

Since then, the increase has been pretty much non-stop.

If, as Alan Greenspan suggested, the Iraq war was about oil, then we have not seen the benefits yet.

But the former Federal Reserve chairman has told Channel 4 News that the significant problem is the impact of state-owned oil companies on world supply.

There is surging demand too, particularly from developing countries.

Chinese oil consumption is now 7.6 million barrels per day, up 50 per cent in five years.

In recent weeks, geopolitical tensions in the Middle East, with Turkey threatening to invade northern Iraq and continued tensions over Iran's nuclear ambitions, have pushed prices up to these record highs.

But the oil producers blame speculators, particularly secretive hedge funds, for taking advantage of the uncertainty and pushing prices up.

Whatever the reasons, one clear impact of this global surge is upon rising pump prices here.

The average price of a litre of petrol is just over 98 pence, up 14 per cent this year.

It may not be a crisis because it reflects rampant demand not the supply restrictions of the 1970s.

Yet the oil market is in a precarious position, prone to even the smallest of shocks.