Concerns mounting on cost of oil

Concerns were mounting today over the cost to the economy of sky-high oil prices after a barrel of crude reached a new 13-year high.

New York crude-oil futures topped $40 a barrel today after surprisingly strong U.S. April jobs data underpinned expectations for improving economic growth.

The surge in crude prices stems from tighter supplies caused by signs of economic recovery in the United States and rampant demand for oil in China and India.

Fears that oil installations in the Middle East have become terrorist targets and production cuts by oil cartel Opec have also driven prices higher.

Economists warned that the high cost of crude posed a real threat to growth at a time when economies were recovering from a prolonged slowdown.

The Bank of England on yesterday voiced concerns on inflationary pressures that contributed to its decision to raise interest rates to 4.25%.

Also yesterday, Prime Minister Tony Blair recalled the severe impact previous spikes in oil prices had on the global economy, while the International Energy Agency (IEA) has warned that up to 0.5% could be wiped off growth in major western economies.

Motorists in the UK are already feeling the pinch at the pumps with the price of a litre of unleaded driving beyond 80p.