The price of oil burst through
the $71 a barrel mark today amid revelations that proven reserves had fallen
for the first time in 10 years and predictions that the price could eventually
hit $250.
The latest high – from lows of
$30 only four months ago – came on the New York Mercantile Exchange, where the
cost of July deliveries rose by $1.35 to $71.36.
This comes on top of a $2 rise
the day before as investors rushed into the market on the back of lower
stockpile figures, higher demand estimates and speculation against further
falls in the dollar.
"I wouldn't be surprised if
we're testing $80 in a week or two," said one analyst, while BP's chief
executive, Tony Hayward, questioned whether $90 could be the "right"
value.
Alexei Miller, chairman of the
Russian energy group
Gazprom, raised the stakes further when he reiterated last year's estimates of
$250 a barrel. "This forecast has not become reality yet, given that the
[credit] crisis gained momentum and exerted a powerful impact on the global
energy market. But does this mean that our forecast was unrealistic? Not at all."
The latest surge has also raised
fears that higher energy costs could snuff out the nascent economic recovery.
Shares on Wall Street's Nasdaq index fell 1%.
The febrile atmosphere in oil
markets was fed by the publication of BP's Statistical Review of World Energy,
which showed that the world's proven crude reserves had fallen by 3bn barrels
to 1.258tn by 2008 from a revised 1.261tn in 2007.
Declines in important producers
such as
The drop is partly attributed to
a drop in exploration drilling due to the precipitous fall in oil prices last
year but also to the end of "easy" oil. Conflict
this week in the Amazon and speculation about
Tony Hayward, BP's chief
executive, insisted there was enough crude to last 42 years at current
consumption levels, roughly the same as last year. Adherents of "peak
oil" – the theory that the maximum rate of oil production has been reached
– believe supplies will run out much sooner because of growing demand.
The BP boss said: "Our data
confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world's
energy needs for decades to come." Higher prices allowed companies to
invest in finding further reserves while not choking off demand, he said.
"There is a rational
argument to say that somewhere between $60 to $90 a
barrel is the right sort of level," he said.
Global oil consumption fell 0.6%
to 81.8m barrels a day in 2008, the first decline since 1993 and the largest
drop for 27 years.
By contrast, gas use rose by 2.5%
globally and 16% in China.
The use of coal, the heaviest emitter of climate-changing carbon, rose 3.1%,
with Chinese demand up 6.8%, leaving it with a market share of 43% despite more
high-profile announcements about its commitment to renewables.
BP says it is difficult to
compare "primary" carbon fuels with renewable sources of electricity.
BP notes that globally solar capacity rose nearly 70% and wind by 30% year on
year but says renewables only generated 1.5% of global electricity and
therefore began at a low base.But it notes these sources are playing an
increasingly important role in some countries with wind power providing 20% of
total electricity generation in Denmark, 11% in Spain and 7% in Germany.
Despite the 2008 rise in coal consumption,
the BP data showed growth in the use of the fuel continued to decline compared
with 2007 when it rose 5% and five years ago when it went up by 8%.
But the coal figures will alarm
environmentalists and increase the calls for companies and governments to speed
up trials on "clean coal" technology and the use of carbon capture
and storage.