Oil prices hit a new record yesterday, extending gains which followed news that BP was halting production at the biggest oilfield in the US, possibly for months.
Some commentators believe oil will break through $80 (€62) over the coming month, pushing petrol prices for consumers to new highs at the pumps.
The Federal Reserve, which sets monetary policy for the US, has meanwhile halted a string of interest-rate rises lasting more than two years, leaving its benchmark rate steady yesterday.
The Fed's policy-setting open market committee voted to keep the federal funds rate target at 5.25 per cent, pausing a cycle that had brought 17 successive hikes since mid-2004.
The Fed will now wait to gauge whether a slowing economy will keep inflation in check. Recent economic indicators have pointed to a downshift in the US economy, led by a cooling housing market, but wages and prices continue to rise.
"Inflation pressures seem likely to moderate over time," the Fed said in a statement. It added however: "Nonetheless, the committee judges that some inflation risks remain."
Further rate moves will depend on the outlook for prices and growth, the policymaker said.
Closer to home, consumers' concerns are likely to focus increasingly on the cost of fuel as oil prices continue to climb. Paul Harris, head of energy and emissions at Bank of Ireland Global Markets, said that with the prospect of more tropical storms interrupting supply to the US, prices could easily rise further.
"In the event of a Middle Eastern situation deteriorating further and a rising risk of Gulf weather systems worsening, a push through $80 could not be ruled out before the end of August," he said.
Mr Harris also suggested that the surge in petrol prices at some service stations could rise to €1.30 in the near term.
The most recent petrol survey conducted by AA Ireland showed the average price for a litre of unleaded in the Republic last month was €1.17.
London Brent crude rose 35 cents to a new all-time high of $78.65 yesterday, a cent higher than Monday's mid-session peak of $78.64. By late afternoon, it had fallen back to $77.99, 31 cents down on the day.
BP began shutting down its 400,000 barrel per day Prudhoe Bay oilfield on Sunday after discovering a corroded pipeline and said it could be weeks or months before production resumed.
The outage added to traders' concerns about the adequacy of supply in view of violence in the Middle East and prolonged production outages in Nigeria.
It has underlined the vulnerability of the world's ageing oil infrastructure, much of which dates back around 30 years. - (Reuters)
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