No end in sight for rising oil costs

THIS time last year, when the price of oil was about $68 per barrel, the debate was whether or not the price could rise above the $100 mark, with the general feeling that such an event was unlikely.

Now, questions surrounding how long it may take for prices to top the $200 mark are not uncommon — even though most commentators do not foresee a huge increase in the coming months.

Since last August, oil prices have more than doubled — at one point reaching $150 per barrel.

Yesterday, US crude oil was trading at about $120, while London Brent oil followed a three-month low of $115, earlier in the week, to creep back up to about $119.

“It would be hard to put a cap on the prospects of a price growth, but barring damaging world developments like US military activity in Iran, which controls about 40% of the world’s oil supply; which would dramatically raise prices, we should see a more sustainable level of increase with oil to be about $120 or $125 by the end of the year,” according to Paul Harris, head of natural resources at Bank of Ireland Global Markets.

The knock-on effects of the price increase have been widespread — fuel surcharges upping airline travel costs, price hikes from both the ESB and Bord Gáis and the price of petrol at the pump rising and the likelihood is that these increases will continue. The one given, seemingly, is that the overall price of oil won’t revert to last year’s levels.

“The cost of exploration — actual oil extraction — alone means it would be difficult for oil prices to dip below the $100 per barrel mark at any time in the future,” added Mr Harris.