Iranian
stand-off pushes oil to fresh high
Refinery
problems add to pressure as petrol threatens to hit £1 a litre
Ashley Seager
Friday August 12, 2005
The
Guardian
Oil prices shot
up to yet another record yesterday, driven by Iran's stand-off with the
west over its nuclear plans and by more refinery trouble in the United
States.
Markets were also
supported by a warning from the International Energy Agency (IEA) that
crude output from non-Opec countries such as Russia and Norway had been
disappointing.
The price of a
barrel of US light crude rose more than a dollar to hit $66 for the
first time on the New York Mercantile Exchange, as oil rose for the
ninth trading day in the past 11. In London, Brent crude surged $1.55
to $65.66.
Oil prices have now
risen almost 10% this month and nearly 120% since spring last year,
driven by soaring demand from the United States and China at a time
when producers have struggled to pump more oil.
This has pushed up
petrol prices at the pump to records on both sides of the Atlantic and
makes the £1 litre a real possibility in Britain. In the US, where fuel
duty is much lower, prices have risen to the equivalent of about 35p a
litre.
Motorists' groups
the AA here, and the equivalent AAA in America, yesterday warned
drivers to brace themselves for higher prices as rises in crude prices
take several weeks to feed through to the pump.
An AA spokesman said
prices yesterday were at an average of 90.3p for unleaded and 94.1p for
diesel and he urged British drivers to economise on fuel.
"Motorists should
start to help themselves. If you drive at the speed limit on a motorway
instead of 80mph, you can save 40p every 10 miles. If you switch off
your air-conditioning, you will use 10% less fuel," said spokesman Luke
Bosdet.
The oil market
started badly yesterday as the Paris-based IEA delivered its judgment
that non-Opec nations were not pumping as much oil this year as had
been hoped, leaving an already overstretched Opec cartel, which pumps
nearly half the world's oil, to make up the shortfall.
Later in the day the
market was reminded of the fragility of supplies from the Middle East,
where most Opec members are. Iran continued its stand-off with the west
over its plans to restart a nuclear programme, telling the UN's
International Atomic Energy Agency that its demands that Iran re-freeze
its nuclear programme were "unacceptable".
Earlier in the week
the market had pushed higher on news that the United States was closing
its embassy in Saudi Arabia for two days because of a terrorist threat.
The Saudis pump
almost one in every seven barrels the world consumes, so markets always
react badly to negative headlines from the kingdom, such as the recent
death of King Fahd.
There were also
further reports yesterday of refinery problems in the US, which
consumes a quarter of the world's petrol and where the summer motoring
season is in full swing.
BP shut parts of a
large refinery in Texas following a fire, while ConocoPhilipps had a
power problem at a refinery in Illinois.
Experts said a rash
of refinery problems around the world have been caused by pumping flat
out to meet demand. The problem is that any breakdowns only serve to
push prices higher.
"Refining problems
are behind the higher prices today, which have pushed Gulf Coast cash
prices extremely high," said Tom Knight, of traders Truman Arnold in
Texas.
Experts remained
divided about how much further oil prices could rise, if at all. They
are only about $15 a barrel below the all-time high in real terms.
Adjusted for inflation, the price hit $80 a barrel during the oil spike
of 1979, which followed the Iranian revolution.
Some analysts have
warned that oil prices could shoot to more than $100 a barrel, causing
trouble for the world economy, especially if the winter in the northern
hemisphere is harsh and pushes up demand for heating oil. Others think
that when the US motoring season ends next month, oil prices could fall
back sharply.
