Oil prices taking on steam

Oil prices over $125 with predictions of $200

World oil prices eased but remained above US$125 this morning as investment funds and supply concerns push costs to another high. Prices have rocketed since breaking the US$100 barrier at the start of 2008.

Brent North Sea crude has dropped 61 cents lower to US$124.79 dollars a barrel after briefly hitting an all-time peak of US$125.90 dollars on Friday.

Brokerage Goldman Sachs last week forecast prices would reach US$150-200 a barrel within two years due to lack of adequate supply growth, particularly from non-Opec countries, while others are arguing that costs could fall to as low as $50 a barrel in the same timeframe.

Many analysts scoffed when Goldman Sachs predicted that oil would go to US$100 a barrel more than two years ago.

Despite the slowing US economy seeing petrol demand fall by about three percent over the past twelve months oil prices continue to rise because of stock-piling in anticipation of rising demand, particularly from China and India.

In addition, investors are buying oil as a hedge against a dollar which is weakening as the US economy struggles.

Inflation is also an issue – during the 1979 oil crisis oil prices peaked at US$39.50, equal to US$103.76 in today’s money when adjusted for inflation.
Last modified on Monday, 12 May 2008 11:47

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