Oil prices could hit $100 per barrel

CRUDE oil reached a record in New York for a third straight day, approaching $61 a barrel.

The election of a nationalistic government in Iran raised concern foreign investment may suffer in OPEC’s second-largest producer.

Crude oil for August delivery rose as much as 80 cents, or 1.3 percent, to $60.64 a barrel, the highest price since oil started trading on the New York Mercantile Exchange in 1983.

In London oil was up 55 cents, 67% from a year ago. It averaged less than $19 from 1995 through 1999.

Some analysts are warning that oil could hit $100 per barrel if oil supplies get interrupted in the months ahead either by terrorists or technical failures. Concerns are also growing about the OPEC countries ability to deliver higher production.

An emerging consensus on the oil fronts says that unless the demand for oil eases in the months ahead prices will continue to rise.

To put them back up to the last record level, which was back in 1980 oil would have to hit $95 per barrel.

Experts had warned before the election of an extreme conservative in Iran that such a possibility was on the cards. The changing political scene in the Middle East has added to that possibility analysts believe.

Mahmoud Ahmadinejad, the new Iranian president, said he favours domestic companies to develop the country’s oil reserves, the world’s second largest, and it’s feared his plan to move to a nuclear option to generate electricity will increase tensions with the US.

“It’s going to be very challenging for Iran to increase oil production,” said Francisco Blanch, senior energy strategist at Merrill Lynch & Co in London.

“What the country needs now is money. The new government has made it clear that foreign investment isn’t going to be welcome.”

Ireland is feeling the impact since the start of the year as the average price of petrol has risen from 95cent to over 101cent per litre.

The AA in Ireland has warned of further increases.

Continuing euro weakness has pushed the dollar to nine month highs, a fact that has added to the oil price impact.

Last year domestic gas rose by nearly 11% and consumers face a similar hike from October 1.

Negotiations are currently under way between Bord Gáis and the regulator.

The regulator recently paved the way for a 36% hike in electricity prices, which also reflects the growing cost of oil - charges are not expected to be increased by that amount in the short term.