Oil prices high amid future supply fears

OIL prices have traded at over $62 per barrel close to historic highs over the past 24 hours as fears for future oil supplies intensified.

This followed the death of King Fahd of Saudi Arabia after a 23-year reign.

Saudi Arabia is the biggest supplier of fuel to the US and controls the largest share of the world’s oil reserves.

On top of the political concerns raised by the death of the king, fears about Saudi Arabia’s ability to produce at current levels have raised further concerns in the markets.

As a result, oil prices are hovering above $60pb as the state of nervousness that has gripped the market since the invasion of Iraq refuses to subside.

About one third of the price is attributable to market nervousness, according to David Horgan, chief executive Petrel Resources, which is active in Iraq.

The real impact of the oil crisis is being felt at the petrol pumps and in the central heating market.

Last week, Bord Gáis announced a 25% hike in prices to the consumer. It follows a sharp rise in the future price per therm of gas from 11p to 44p due for delivery in January 2006 from Britain, where Bord Gáis sources most of its gas needs.

The increase is attributable to supply and demand, some keen market watchers insist. They say the price of gas is destined to stay under severe pressure due growing demand.

In an unprecedented move, Chevron, one of the biggest oil groups in the world, has set up its own website to discuss the crisis. It says: “One thing is clear - the era of easy oil is over.What we do next will determine how well we meet the energy needs of the entire world in this century and beyond.”

Huge population growth is driving the demand. The world’s population has doubled since 1972 requires huge amounts of energy. But the US, with just 4% of the world’s population, accounts for 25% of global energy consumption.

In another 20 years, global energy needs will have risen by 40%. This is at a time when oil reserves will be running out.

Chevron says $16 trillion of investment is needed to cope with the decline of oil and gas and produce alternative fuels.