Oil prices "shock but not crisis"

The U.S. energy secretary has said Friday's record one-day jump in the price of oil, to USD 139 a barrel, came as a shock. But Samuel Bodman dismissed suggestions that the world faced a crisis, amid fears the oil price spike could tip the global economy into recession. Oil prices "shock but not crisis" Bodman called for an end to fuel subsidies in consumer countries and increased investment among producers. He was speaking in Japan, ahead of a G8 ministers' meeting on energy issues. The price of crude in New York surged more than USD10 on Friday. Reports suggested it could reach USD150 a barrel by July because of rising demand and political tension. The spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years. Officials and ministers from the Group of Eight key industrialised nations (G8), as well as China, India and South Korea, are meeting for two days in the northern city of Aomori, to plot a strategy to deal with volatility in oil, gas and coal markets. Demand and supply "It's a shock, but if you look at the rate of oil production globally, it has been 85 million barrels a day for three years in a row," Bodman said ahead of the talks. "We know demand is increasing because a lot of nations are still subsidizing oil, which ought to stop," he said. He also said he did not see a need for a tightening of regulation of oil markets. Some say market speculation, and a lack of disclosure of information over the size and nature of reserves, may be stoking the price rises, as well as concerns that demand may be growing faster than supply. On Friday light crude set a high of USD 139.12 in after-hours trading on the New York Mercantile Exchange after hitting USD 138.54 at the regular session. Crude oil hit a record high of USD 135 a barrel last month. Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to USD 150 as early as July. Some analysts have suggested that prices would reach as high as USD 200 a barrel during the next 18 months. The price of the benchmark light, sweet crude oil has already seen rapid gains over the past months and has gained more than 40 percent over the year. It is more than twice the price it was a year ago. The market was also responding to a statement by Israel's transport minister that an attack on Iran was "unavoidable" after sanctions to prevent Tehran from developing its nuclear capability had failed. Investors hedging oil against the weak dollar has also pushed up the price of oil. Correspondents say fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters, as well as Israeli threats to strike Iran over its nuclear programme. Oil prices had recorded losses earlier this week after doubts about future demand took hold of the market. Both the Indian and Malaysian governments have raised fuel prices in order to cut the subsidies they provide.

Oil prices "shock but not crisis"

Bodman called for an end to fuel subsidies in consumer countries and increased investment among producers.

He was speaking in Japan, ahead of a G8 ministers' meeting on energy issues.

The price of crude in New York surged more than USD10 on Friday.

Reports suggested it could reach USD150 a barrel by July because of rising demand and political tension.

The spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

Officials and ministers from the Group of Eight key industrialised nations (G8), as well as China, India and South Korea, are meeting for two days in the northern city of Aomori, to plot a strategy to deal with volatility in oil, gas and coal markets.

Demand and supply

"It's a shock, but if you look at the rate of oil production globally, it has been 85 million barrels a day for three years in a row," Bodman said ahead of the talks.

"We know demand is increasing because a lot of nations are still subsidizing oil, which ought to stop," he said.

He also said he did not see a need for a tightening of regulation of oil markets.

Some say market speculation, and a lack of disclosure of information over the size and nature of reserves, may be stoking the price rises, as well as concerns that demand may be growing faster than supply.

On Friday light crude set a high of USD 139.12 in after-hours trading on the New York Mercantile Exchange after hitting USD 138.54 at the regular session.

Crude oil hit a record high of USD 135 a barrel last month.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to USD 150 as early as July.

Some analysts have suggested that prices would reach as high as USD 200 a barrel during the next 18 months.

The price of the benchmark light, sweet crude oil has already seen rapid gains over the past months and has gained more than 40 percent over the year.

It is more than twice the price it was a year ago.

The market was also responding to a statement by Israel's transport minister that an attack on Iran was "unavoidable" after sanctions to prevent Tehran from developing its nuclear capability had failed.

Investors hedging oil against the weak dollar has also pushed up the price of oil.

Correspondents say fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters, as well as Israeli threats to strike Iran over its nuclear programme.

Oil prices had recorded losses earlier this week after doubts about future demand took hold of the market.

Both the Indian and Malaysian governments have raised fuel prices in order to cut the subsidies they provide.