Channel 4 News: Time to buy a bicycle? Oil prices rise

Why has the price of oil has hit a new high and what it’s going to do to the economy? It’s what drives global economies and the cost is shooting up – the price of a barrel of oil has broken records now for several days, but last night touched the $90 mark before falling back slightly. As so often before, tension in the middle east is what started this spike in oil prices. Turkish soldiers are patrolling the border with Iraq and the oil market is reflecting fears that Turkey may invade its neighbour – to respond to attacks by Kurdish separatists.

Another factor pushing up prices is massive demand from Asia. China’s exponential economic growth in particular depends on a steady supply of oil.

‘We’ve reached $90 in overnight trading, only by two cents over. There is an argument the market needs to get to $100 just see what it feels like. And afterwards if the market doesn’t like it, it will come straight back down.’ – Jean-Luc Amos, Platts energy data consultancy

The price crude have quadrupled since 2001 when a barrel cost just over $21. Early in the Iraq war the price went beyond $50 a barrel. Shocking at the time but cheap compared with now. Today a barrel of oil costs close to 90 dollars – and many say breaking the £100 threshold is a distinct possibility. “We’ve reached $90 in overnight trading, only by two cents over.

There is an argument the market needs to get to $100 just see what it feels like. And afterwards if the market doesn’t like it, it will come straight back down.” – Jean-Luc Amos, Platts energy data consultancy And what about consumers? It can take three to four weeks for a rise in oil prices to affect the forecourt.

Diesel is already at record 99.5 pence per litre. The AA says if oil reaches $100 a barrel, unleaded petrol could reach £1.10 pence a litre – a level which many drivers could not tolerate. And if fuel costs more, the price of food and other consumer goods may also increase as retailers pass on higher transport costs. One ray of hope though – the big oil producers say they may increase production to help control prices.