LONDON, 8 May 2004 — Oil prices hit $40 a barrel yesterday on concerns over security in the Middle East and tight US gasoline supplies, underlining concerns that world economic growth may be reined in by rising energy costs. US light crude touched $40 for the first time since October 1990, shortly after Iraq’s invasion of Kuwait in the crisis that led to the Gulf War. It later eased to $39.82, 43 cents higher on the day. London Brent peaked at $37.18 and by 1715 GMT was up 47 cents at $37.00 a barrel.
Oil analysts say prices are not likely to ease much any time soon.
In the United States, the Bush administration is concerned about the impact of high prices at the pump in an election year and is calling on the Organization of Petroleum Exporting Countries to calm prices by increasing output. Treasury Secretary John Snow said the oil spike is “not helpful” for the economy.
“Oil is unhelpful to both growth and inflation and this would reinforce the view that the world economy is set to cool last this year,” said HSBC global economist Gwynn Hacche.
Accounting for about 45 percent of world gasoline consumption, the United States has seen retail prices hit record highs this year with demand bolstered by the growing numbers of low-mileage-per-gallon sports utility vehicles on America’s highways. US gasoline futures yesterday set a record $1.335 a gallon.
OPEC blames a shortage of US refining capacity and heavy betting by speculative investment funds on oil futures for price gains of 22 percent since the turn of the year. “The reasons that are affecting the world oil market are really beyond OPEC’s control,” OPEC President Purnomo Yusgiantoro said yesterday.