The price of oil on both sides of the
Atlantic has hit its highest level since the financial crisis.
In Europe, Brent crude futures rose to
$91.58 per barrel, while in the US, West Texas Intermediate hit $89.35 – the
highest levels since October 2008.
Despite the market rally, prices still
remain 40% below their pre-crisis peak.
Among the factors driving prices higher
are rising demand because of the global economic recovery and cold weather in
Europe, as well as the weak US dollar.
Meanwhile, temperatures are also
expected to fall in the eastern United States, according to the US National
The rising price was only briefly dented
in early trading, after the release of weaker than expected US jobs data for
However, the data – and comments from US
Federal Reserve Chairman Ben Bernanke – raised expectations of further monetary
easing by the US central bank.
Any increase in the Fed’s
“quantitative easing” – printing new dollars to buy up US government
debt – is likely to depress the dollar’s value further, raising the price of
oil in dollars.
Many banks have recently raised their
forecasts for the oil price over the next two years, with Goldman Sachs now
saying it will rise to $100 in 2011.
The current oil price is already
significantly above the levels experienced prior to 2007.
During 2007-08, oil and most other
commodities were subject to a speculative bubble that pushed the price of Brent
crude up to $147.50 at its peak in July 2008.
This time the rising oil price is also
being shadowed by price rises in only a handful of other commodities – notably
grain and cotton.