Oil Prices Hit New High

Motorists were today told to expect petrol prices to remain above 80p a litre for the "foreseeable future" as oil prices soared to a new high.

Oil prices reached record levels for the second day in succession as the price of a barrel of crude in New York broke through the $44 (£24) mark to peak at $44.24.

Today's jump in prices was sparked by comments from the Opec president, Purnomo Yusgiantoro, who said oil prices were at "crazy" levels, but added that the oil cartel could do little to ease pressure on them.

"The oil price is very high - it's crazy. There is no additional supply," Mr Purnomo told reporters in Jakarta.

"Minister Naimi has said Saudi Arabia can increase production, but they cannot do it immediately," he added, referring to Ali al-Naimi, the Saudi oil minister.

Mr Purnomo's comments followed similar remarks by the Algerian oil minister, Chakib Khelil, who said Opec had done all it could to stop this year's oil price surge. "Opec can do nothing," he said yesterday.

The AA said motorists would probably see forecourt prices stay at their current high levels because of tight supplies on the oil market.

Richard Freeman, an AA spokesman, said: "I think we are unfortunately going to have to live with petrol over 80p a litre for the foreseeable future. Certainly, in the short to medium term, it looks as though the pressure will continue."

Following a dip in prices in the spring, oil has climbed back up to record levels. First, the markets became worried over a disruption in supplies from Russia as Yukos, the country's biggest oil company, became embroiled in tax dispute with the Russian government.

Yukos has said it may have to close down this month as the Kremlin seeks a backtax payment of $7bn for 2001 and 2000.

The Bush administration's warning of possible terrorist attacks against financial institutions in New York, Washington and Newark, New Jersey, has compounded market jitters.

There is also the realisation that demand - stoked by strong economic growth in the US and China - will continue to put pressure on prices.

"Markets are very, very jittery, and I think it's not just geopolitical events and Yukos that are to blame," Bruce Evers, an Investec oil expert, said.

"It is the growing realisation that demand continues to rise and supply is constrained. You can't just wave your magic wand and produce another million barrels a day from nowhere. It takes time."

Oil prices have surged by more than one-third since the end of 2003 on worries that oil producers would be hard pushed to meet growing demand, with little leeway for disruption.

Analysts have forecast that prices are likely to rise further ahead of winter, possibly to a peak of $50 a barrel.