Oil Prices Climbs As Chinese Economy Grows

Oil prices have continued to climb on Monday, surging to a record on concerns that demand will outstrip supply.

Developing economies such as China and India continue to stoke their booms with oil, while consumers are still filling up their cars with petrol and diesel. As these two economies grow, particularly that of China, then the pressure on scarce resources will also grow. China’s growth rates are huge by global standards and the economic activity of that country will begin to have a major impact on the world economy.

China's insatiable demand for energy is prompting fears of financial and diplomatic collisions around the globe as it seeks reliable supplies of oil from as far away as Brazil and Sudan. China has its own reserves of oil and natural gas and once was a net oil exporter. But as its economy has expanded by an average of nine per cent per year for the last two decades, so has its demand for energy. This year it overtook Japan as the world's second largest consumer of energy, behind the US.

US sweet light crude was trading 51 cents higher at $60.35, after earlier hitting $60.64. Brent, the other main contract, rose 60 cents to $58.96. Analysts said that prices are likely to sit close to the $60 mark for some time as demand shows little sign of abating.

Also driving gains on Monday were concerns of a clash between Iran's newly elected President and the US.

Central bankers from around the world were in Basel, Switzerland, for a meeting of the Bank for International Settlements (BIS) and discussed the trend of oil prices in the future. The organisation's top economic adviser Bill White warned that "there could be repercussions associated with oil prices that might be greater than the consensus expects".

"There was a general consensus that we will have high oil prices for at least the next two or three years," said Martin Redrado, governor of Argentina's central bank. Already during the past 12 months, the price of crude has jumped by almost two-thirds, though the extra costs have done little to diminish demand.