A storm in the North Sea helped to push the oil price closer to $100 a barrel today, as the average price of a litre of petrol broke through £1 for the first time in the UK.
A barrel of US light crude oil hit a new all-time high of $98.62 this morning, having reached $97.07 in fevered trading yesterday. Brent crude also rose again, hitting a new high of $95.19.
The rise was partly spurred by the declining dollar, which hit a new 26-year low of $2.1053 against the pound in morning trading in London.
Iraq’s massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi Parliament within days.
The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday.
It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract crude and allow the first large-scale operation of foreign oil interests in Iraq since the industry was nationalised in 1972.
The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President Dick Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010.
“So where is the oil going to come from? … The Middle East, with two-thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies,” he said.
Europe’s oil supplies from Russia were being held to ransom last night as the Kremlin fell into bitter dispute with a former Soviet satellite state.
Moscow abruptly halted millions of barrels of oil destined for the EU via Belarus in an increasingly hostile wrangle with its neighbour.
The move raised further questions over whether Western Europe can trust Mr Putin for its energy supply. Experts said that Russia had a deeply entrenched habit of manipulating oil and gas supplies as a substitute for diplomatic policy.
Russia’s strong-arm tactics have added resonance in Britain, amid persistent speculation that Gazprom, the Kremlin-controlled gas group, will seek to buy Centrica, the British Gas group, which has 16 million gas and electricity customers in the UK. Angela Merkel, the German Chancellor, told The Times last night that Germany will use its six-month EU presidency to improve energy security on the Continent.
In her first interview with a British newspaper she signalled that she would take a harsher line towards Russia than her predecessor, Gerhard Schröder, who is now on the board of a German-Russian consortium constructing a gas pipeline linking Russian gasfields with Western Europe.
The World Bank has suspended all loans to Chad, saying the African country’s government had breached an agreement over oil revenue controls.
Bank president Paul Wolfowitz announced the move, one of the most drastic the bank can take against a member country.
He accused Chad’s government of acting “unilaterally” after it voted to relax controls on the use of its oil profits.
The bank had lent Chad more than $39m (£23m) on condition that non-government groups checked its use of oil revenues.
The private sector arm of the World Bank, the International Finance Corporation, also lent another $100m and mobilised a further $300m for the pipeline.
DID North Sea oil save Britain from disaster? Or was it a resource wrongfully plundered and pillaged 30 years ago?
How easily we have forgotten how near to meltdown the British economy has been in our lifetimes. Not the ERM crisis of September 1992 that did for the Major government; this was a blip compared with the crisis of 1975 that did for the Labour government of the time.
Cabinet papers released last week under the 30-year rule reveal two haunting truths about this period. The first is how near we came to a serious financial meltdown. The second is the acute sensitivity to the SNP challenge and the implications that it carried for the control of the North Sea oilfields. For it was this asset that was, in the words of a 1975 Foreign Office memo, a “rainbow spanning the sombre horizon”. It was nothing less than the lifeline that led Britain, helped by an emergency IMF loan the following year, to eventual stability and prosperity.
Chad has reacted angrily to warnings from the World Bank, after its parliament voted to relax controls on the use of its oil revenues.
The government has accused the World Bank of acting like a coloniser.
The body lent Chad more than $39m (£23m) to build a pipeline with an estimated total cost of almost $4bn.
It was on condition that Chad’s churches, trade unions and non-governmental organisations monitored how oil revenues were spent.
This was meant to guaranteed that oil money was used to help reduce poverty in Chad but the new laws would give Chad more control over the money.
The bank has warned if Chad breaks its agreement, that is a breach of contract. Further funds will be halted, and repayment rates on the current loan increased.
World Bank President Paul Wolfowitz said the law was a deciding factor in the bank’s financial support for the massive pipeline project in 1999.
Consumers will have to pay more for oil in 2006 than the record prices paid in 2005, according to a Reuters poll of industry analysts.
The survey of 30 analysts’ forecasts shows the price of benchmark U.S. light crude oil futures in 2006 will average $57.34 a barrel.
That is more than the forecast for 2005 of $57.03 a barrel, which would already be the most expensive year for crude since U.S. light crude futures began trading on the New York Mercantile Exchange in 1983. The average in 2004 was $41.47.