Brown Voices Concern Over Record Oil Prices

The oil price spiraled to an all-time high today of almost $140 a barrel, leading Gordon Brown to declare it was "the most worrying situation in the world".

The spiral upwards continued on the back of a weaker dollar and a fire on a North Sea oil platform with traders, dismissing as too little, too late a weekend promise by Saudi Arabia to pump more oil to increase supplies.

A barrel of US crude for delivery in July hit $139.89 in US trading, breaking through the previous high of $139.12 set last week. North Sea Brent crude also hit a record high today, touching $139.32 a barrel.

The upward moves put further pressure on companies to raise petrol prices in Britain, which are already under pressure because of shortages due to a strike by tanker drivers working for Shell garages.

The latest change in crude values was sparked by statistics from New York State manufacturing index which fell for the fourth time in five months. This pushed the US currency down against other major currencies and drove up the price of oil. Although crude demand should be reduced by a downturn in manufacturing, financial speculators have been buying oil - and pushing its value up - as a hedge against further falls in the greenback.Oil has more than doubled in value in the past year, driven by weakness in the dollar, traders betting the price will keep rising and increased demand. It was also pushed up yesterday by a fire at a StatoilHydro facility in the North Sea, which could affect 150,000 barrels a day of production out of Norway.

This has all fueled inflation fears while pushing up motoring costs for business and consumers which, in turn, this has caused blockades in Spain, plus protests in South America and Indonesia. In the UK, motorists have also faced shortages due to the tanker drivers' dispute.

The latest price hikes dashed hopes in consuming nations that promises by Saudi Arabia, Opec's largest oil producer, to pump another 200,000 barrels a day from next month would take some of the heat out of the market. "They have to increase by north of 1 million barrels a day (in order to have an impact on prices) and the market doesn't think they have it," said James Cordier, president of Liberty Trading Group in Tampa, Florida.

The enormous increase in world oil prices was "the most worrying situation in the world" said the British prime minister, who called for "long-term dialog" between oil consumers and producers. Countries would have to increase nuclear power and renewable energy capacity to reduce its dependence on crude, he added.

Brown was speaking at a joint press conference with President George Bush in London, following talks between the two leaders. Bush called the Saudi conference an "interesting idea" but has stated that he will not be going.

Brown said there was a growing view that the price of oil was "increasingly dependent, not just on today's demands, but on what people perceive as demand outstripping supply next year and in the long term."

The prime minister reiterated that he would attend the Saudi summit this Sunday between oil producing countries and oil consuming nations. Saudi Arabia has twice announced increases in its output in the past two months, raising production to 9.7m barrels a day.