Oil prices hit new record high

Oil prices moved closer to the 50 US dollars a barrel mark by rising to a record high in New York today.

The cost of crude soared to a fresh 21-year high of more than 47 US dollars a barrel amid continued concerns over tight global supply.

Prices have risen to new records on an almost daily basis since the end of July, sparking fears motorists will face higher prices at the petrol pumps.

Orrin Middleton, analyst at Barclays Capital, said a barrel of crude could hit 50 US dollars by the end of the week if prices continue to rise at the current pace. He added: “It is a question of when, not if.”

Despite fears of the effect of oil prices on the economy, Bank of England Governor Mervyn King last week said there was no need for panic.

He said that, allowing for inflation, oil prices were still only half the level they reached at the end of the 1970s, adding that Britain does not use as much oil today due to industrial changes.

Financial troubles at Russia’s largest oil producer, Yukos, and disruptions to crude exports in Iraq, are among the factors fuelling the current situation.

Traders remained concerned over unrest in Iraq, where fighting continued in the holy city of Najaf despite a peace proposal from the Iraqi interim government.

Analysts have warned that oil demand remains high and major producers and refiners have little spare capacity to make up for any unexpected shortfalls.

Airline Bmi today became the latest UK carrier to increase its fuel surcharge because of the rise in oil prices. It follows similar moves by Air France, British Airways and Virgin.

Higher costs have also brought anxiety for motorists, who have been warned to expect petrol prices of more than 80p a litre for the foreseeable future.