Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education



Front Page

World

UK

UK Politics

Business

Sci/Tech

Health

Education

Sport

Entertainment

Talking Point

In Depth

On Air

Archive
Feedback
Low Graphics
Help

Tuesday, August 24, 1999 Published at 10:26 GMT 11:26 UK


Business: The Economy

Oil price crisis warning

More petrol price rises will hit drivers and industry

Consumers, car drivers and industry are being warned that the oil market is heading for a price explosion.


Dr Drollas: oil producers don't benefit in the long term
Petrol prices at the pumps have already gone up twice in recent weeks.

Oil prices are now about $21 a barrel, compared with a 30-year low of about $9 last year. Drastic production cuts were introduced in March to push the price back up.

But now the Centre for Global Energy Sudies says there will be a price crisis unless oil-producing countries reverse their policy of cuts in output.

High oil prices have knock-on effects for most of society. They mean dearer petrol for drivers, higher transportation costs for manufacturers, higher production costs, higher electricity costs and a greater burden on industry generally.

It all leads to one thing: a rise in inflation, which inevitably brings the threat of interest rate rises.


[ image: The amount of oil produced is tightly controlled]
The amount of oil produced is tightly controlled
But Saudi Arabia has said it wants to maintain the cuts - arguing the high price of oil is its reward for controlling oil production.

Dr Leo Drollas, Deputy Director of the Centre for Global Energy Studies, predicted petrol prices could go up by 2p a litre in the next few weeks, if the oil price trend continued.

He said that in the US, a 25% rise in oil prices could lead to a 1% rise in inflation, although the effect was likely to be less serious in the UK and rest of Europe. Eventually, any impact on inflation could hit growth.

He warned the oil-producing nations should not keep prices artificially high: "It's not in their longer-term interests to keep prices as high as this because it encourages oil production elsewhere, outside Opec.

"It affects inflation and growth internationally and affects demand for oil in years to come so it's not a good idea."

The US may apply pressure behind the scenes at the Opec countries' next meeting in September to boost output again and bring prices down, said Dr Drollas.





Advanced options | Search tips




Back to top | BBC News Home | BBC Homepage | ©


The Economy Contents


Relevant Stories

05 Aug 99 | The Company File
Shell predicts more oil price rises

06 Jul 99 | The Economy
The power of essential oil





Internet Links


The Centre for Global Energy Studies

Opec


The BBC is not responsible for the content of external internet sites.




In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree