Page last updated at 19:46 GMT, Wednesday, 7 May 2008 20:46 UK

Oil price 'may hit $200 a barrel'

Oil well
Global demand for oil has been fuelled by China and India

The price of crude oil could soar to $200 a barrel in as little as six months, as supply continues to struggle to meet demand, a report has warned.

Goldman Sachs energy strategist Argun Murti made the warning as benchmark US light crude passed the $123 mark for the first time.

Surging demand was increasingly likely to create a "super-spike" past $200 in six months-to-two years' time, he said. Oil prices have now risen by 25% in the last four months and 400% since 2001.

US sweet, light crude hit an all-time peak of $123.53 (63.25) on Wednesday, while London Brent crude jumped to $122.32.

Mr Murti correctly predicted three years ago - when oil was about $55 a barrel - that it would pass $100, which it reached for the first time in January of this year.

Chinese demand

Soaring global demand for oil is being led by China's continuing economic boom and, to a lesser extent, by India's rapid economic expansion.

US light, sweet crude price graph

Both are now increasingly competing with the US, the European Union and Japan for the lion's share of global oil production.

This additional demand comes at a time of continuing production problems in a number of oil-producing nations.

Production is down in Nigeria after the latest attacks on pipelines this week by anti-government militants, while Iraqi exports through the north of the country have been hit by renewed cross-border raids by Turkish forces against Kurdish insurgents.

Oil prices are also rising as the key US summer driving season approaches.

Economists warn that continuing high oil prices will impact on the global economy, hitting growth and fuelling inflation.


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