US crude oil hits a $70-a-barrel high

WEST Texas sweet crude oil for delivery next March hit $70 per barrel in New York yesterday - the highest price ever - as a result of the current crisis gripping the market.

Meanwhile current prices slipped from yesterday’s record high of $68 a barrel as a tropical storm appeared to steer away from vulnerable Gulf of Mexico rigs serving the world’s biggest market, the United States.

Financial bookmakers said they would start taking wagers on $100 a barrel oil if the price broke through $70 per barrel in the near future.

Oil analysts now predict it will be the next psychological barrier to be breached.

To reach the last crisis price hit in 1978/79, oil would need to go to $85 - $90 per barrel and sceptics do not rule out such a prospect.

US orders for durable goods fell 4.9% in July, the biggest drop since January 2004, sharper than all 62 economists had forecast in a Bloomberg News survey.

Every $10 hike in the price of a barrel of oil knocks 0.25% off global economic growth, economists estimate.

Analysts blamed oil price hike concerns for the downturn which they say is eating into the disposable income of the consumer.

Through the 1990s, oil cost $20 per barrel on average.

Some oil experts say the realistic market price at present should be $40 per barrel and blame speculation for the rest of the price increase.

That ignores the fine line between demand and supply where at best world output can outpace demand by 1.5 million barrels per day.

Demand for oil is continuing to grow especially in the Asian economies.

In the past 25 years, demand for petrol in Asia has gone up by 105% compared with 2.5% in Europe and 20% in the US.

The US continues to guzzle fuel supplies, accounting for 25% of total global annual consumption.

Share prices across the globe eased yesterday on the back of the latest oil price spikes as concerns grow about the impact of oil on global economic growth.

Brokers claim supplies of oil, natural gas, gasoline and other products are adequate for this time of year and they blame fears about unexpected supply disruptions for the current price pressure. With global demand averaging 84 million barrels a day this year, the world has scant excess production capacity which is a huge factor in the price spike.

The fears are that we are looking at oil at over $70 per barrel in the months coming. In its weekly petroleum supply report, the US Energy Department said domestic inventories of gasoline fell by 3.2 million barrels last week to 194.9 million barrels, 7% below levels of 12 months ago.