Crude oil price sets fresh record

Higher oil prices act as an unofficial tax on consumers

Oil prices have continued to surge, hitting new records and raising concerns that higher raw material costs may derail a global economic recovery.

A barrel of crude rose to $43.85 in New York, its highest since trading began 21 years ago, ending the day at $43.80.

In London, Brent crude rose 78 cents to hit a 14-year high of $40.05 a barrel, ending the day at $40.03.

Acts of sabotage in Iraq and the possible bankruptcy of Russian producer Yukos means supply remains uncertain.

Demand, meanwhile, is expected to stay strong, driven in part by China's boom.

Rising crude prices have been bolstering profits for oil companies like Chevron Texaco, which reported second quarter revenue on Friday at $38.3bn (£21bn) up from $29.3bn (£16bn) a year ago.

Meanwhile, the CBOE oil index, which tracks the movement of integrated oils, rose by 0.3% to 366.85.

Full throttle

Analysts warn there is very little room to boost output so as to ease prices should the need arise.

Oil cartel Opec currently is pumping more than 90% of its overall capacity, its highest level since 1979.

Earlier this week, Venezuelan oil minister Rafael Ramirez said the organisation had little spare capacity.

It is becoming a worrying factor Hiroshi Watanabe, Japanese government official Why are oil prices so high? Click to see oil price chart

The thirst of economies such as China looks unlikely to abate, with growth forecast at scorching levels.

A pick-up in the US economy also is helping to stoke what the International Energy Agency calls the biggest increase in oil demand for 16 years.

On top of that, it seems as if output may be hit by the problems in Russia and the Middle East.

On Wednesday, Yukos was told to stop pumping oil, the latest twist in a feud over unpaid taxes.

The situation was clarified the next day and the taps stayed open, but analysts are warning of further disruptions at the company that accounts for one in every five barrels of Russian crude.

"There is renewed concern that perhaps Yukos production might be threatened one way or another, and given capacity constraints in OPEC, that could be problematic," said Marshall Stevens, an analyst with Refco.

The situation in Iraq, which owns the world's second biggest proven oil reserves, remains equally problematic.

Output is being dented by sabotage and poor infrastructure and even though the country's oil minister said on Thursday that exports are rising, the market remains sceptical.

Rodrigo Rato, head of the International Monetary Fund, said that while the global economy was now strong enough to weather the effects of rising oil prices, costs are likely to stay higher than was expected "only a few months ago".