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London oil price hits $146 record London oil price hits $146 record
(10 minutes later)
The price of oil has continued to climb - with Brent crude rising above $146 a barrel for the first time.The price of oil has continued to climb - with Brent crude rising above $146 a barrel for the first time.
Brent crude rose by $2.08 to $146.34 a barrel in London. US light, sweet crude rose by more than $1 to $145.22.Brent crude rose by $2.08 to $146.34 a barrel in London. US light, sweet crude rose by more than $1 to $145.22.
Oil prices have risen significantly since the US government announced on Wednesday that its crude stockpiles had fallen by more than expected last week. A spokesperson for the motoring organisation the AA called the rate of increases "eyewatering". Oil prices have risen significantly since the US government announced on Wednesday that its crude stockpiles had fallen by more than expected last week. A spokesperson for the motoring organisation the AA called the rate of increases "eye watering".
A barrel of Brent crude has risen by almost $4 since the beginning of the week.A barrel of Brent crude has risen by almost $4 since the beginning of the week.
The AA estimates that a $2-a-barrel rise in crude oil means an extra penny on fuel prices at the pump. This takes a number of weeks to feed through to the fuel stations.The AA estimates that a $2-a-barrel rise in crude oil means an extra penny on fuel prices at the pump. This takes a number of weeks to feed through to the fuel stations.
"The market can absorb a little bit of the increase on the forecourt, but nothing like this," the AA's Paul Watters told the BBC."The market can absorb a little bit of the increase on the forecourt, but nothing like this," the AA's Paul Watters told the BBC.
Currently, unleaded petrol is currently 118.95 pence per litre on average and diesel 132.20p, according to Experian.Currently, unleaded petrol is currently 118.95 pence per litre on average and diesel 132.20p, according to Experian.
An AA survey in April showed that almost two thirds of motorists were either doing fewer trips by car or cutting back on other spending as a result of higher fuel prices.An AA survey in April showed that almost two thirds of motorists were either doing fewer trips by car or cutting back on other spending as a result of higher fuel prices.
"This is only going to happen more. This is very very bad news for the economy," Mr Watters added."This is only going to happen more. This is very very bad news for the economy," Mr Watters added.
Fuel pricesFuel prices
Oil prices are expected to rise even further.Oil prices are expected to rise even further.
Russian President Dmitry Medvedev, speaking ahead of next week's G8 meeting of leading industrialised nations, predicted that prices would climb to $150 a barrel.Russian President Dmitry Medvedev, speaking ahead of next week's G8 meeting of leading industrialised nations, predicted that prices would climb to $150 a barrel.
"Unfortunately, rising oil prices create problems for the world's economy," he said."Unfortunately, rising oil prices create problems for the world's economy," he said.
Companies across the world have been suffering under the strain.Companies across the world have been suffering under the strain.
Air New Zealand has become the latest airline to say it cannot continue to absorb the rising cost of jet fuel, which is now more than $170 a barrel.Air New Zealand has become the latest airline to say it cannot continue to absorb the rising cost of jet fuel, which is now more than $170 a barrel.
The carrier announced on Thursday that domestic fares would rise by 3% and international fares by 5%.The carrier announced on Thursday that domestic fares would rise by 3% and international fares by 5%.
That followed a profit warning from Hong-Kong based airline Cathay Pacific on Wednesday.That followed a profit warning from Hong-Kong based airline Cathay Pacific on Wednesday.
Supply concernsSupply concerns
The president of oil group Opec also warned that prices could rise further if eurozone interest rates go up on Thursday. Some observers have blamed speculators for pushing oil prices higher.
Opec president Dr Chakib Khelil told the BBC that a rise in eurozone rates would weaken the dollar further, and would cause oil prices to rise. However, Prime Minister Gordon Brown, speaking to a committee of MPs, said he thought an imbalance in supply and demand was the primary reason for the spike in prices.
A weaker dollar makes oil a more attractive investment. "You can't put down to speculation the whole of the problem we are dealing with at the moment," Mr Brown said.
The president of oil group Opec has blamed the weakening of the dollar, which makes oil a more attractive investment.
Dr Chakib Khelil told the BBC that a rise in eurozone rates would weaken the dollar further, and could cause oil prices to rise even further.
The European Central Bank is due to give its latest rate decision at 1245 BST, and there is speculation that the main borrowing cost may increase by a quarter of a percentage point to 4.25% from 4%.
Overnight, the dollar traded at its lowest level against the euro for more than two months, falling to $1.5891 per euro.Overnight, the dollar traded at its lowest level against the euro for more than two months, falling to $1.5891 per euro.
Analysts said that a combination of the weaker US dollar, a drop in equity markets, higher demand, and concerns about supply disruptions in the Middle East and Africa have forced prices up.
"The current market is being driven by the weaker dollar and with the equity markets a disaster, investment money is looking for a more profitable market," said Tetsu Emori, a Tokyo-based fund manager."The current market is being driven by the weaker dollar and with the equity markets a disaster, investment money is looking for a more profitable market," said Tetsu Emori, a Tokyo-based fund manager.