Oil prices fell yesterday after setting a fresh all-time high above $74 (€60) a barrel as some investors took profits across booming commodity markets. It emerged yesterday that the developed world's energy watchdog is looking to nuclear power to deliver security amid growing fears about the reliability of natural gas supplies, particularly out of Iran and Russia.
Statoil became the latest Irish oil company to put up prices, adding 1.58 cent to the price of a litre of unleaded petrol from midnight on Wednesday and 1.82 cent per litre for diesel.
Prices on the international market had hit new peaks after the US government reported a larger-than-expected drop in gasoline inventories, adding to concern created by supply losses in Nigeria and the row over Iran's nuclear programme.
Oil prices have nearly tripled since 2002 and analysts see few signs of the rally coming to a halt as levels push closer to the 1980 inflation-adjusted peak of $82 a barrel, setting alarm bells ringing in consuming nations.
Analysts in Dublin believe the latest increases have the potential to add 0.2 of a percentage point to the annual inflation rate of 3.5 per cent in March. But with ongoing social partnership talks in mind, Ibec indicated yesterday that it would not concede higher pay in light of rising inflation.
"Compounding the problem by chasing higher inflation through higher wage demands would be the ultimate folly," said the business lobby's director of economic policy, Danny McCoy.
Venezuelan president Hugo Chavez said yesterday that oil could rise even further. He told reporters in Brazil that the price of oil "could reach $100, it depends". The leftist Chavez said US threats of sanctions against Iran for its nuclear program are contributing to record prices.
The International Energy Agency (IEA) - which includes Ireland - agreed to support a study that will almost certainly result in it pushing for greater reliance on nuclear power in a move that highlights the urgency of finding an alternative to gas. Such a shift would also be aimed at achieving reductions in carbon emissions.
"Security of supply and climate change are what we are worried about," Fatih Birol, the IEA's chief economist, said yesterday. "We think security of supply will be a big problem."
All 26 members of the IEA support the study, although their nuclear policies differ. In addition to Ireland, Austria and Germany are opposed to the use of nuclear fuel. Spain, Britain, Italy and Sweden are reviewing whether to build new nuclear plants.
Half the world's natural gas reserves lie in Russia and Iran, neither of which are viewed as a reliable supplier. Most of Iran's vast gas reserves remain untapped as its row with the West over Tehran's nuclear ambitions thwarts investment progress. This week, Gazprom, Russia's gas monopoly, increased supply fears when it threatened to redirect supplies if European Union countries blocked its expansion ambitions.
The threats by Gazprom to shift its focus from Europe to American and Chinese markets have highlighted the EU's concerns about its dependence on foreign energy suppliers, the European Commission said yesterday. Ferran Tarradellas Espuny, a commission spokesman, said Gazprom's threat underscored the EU's "need to diversify both the origin of our supplies and our supply routes".
France tried to play down the threat from one of its biggest gas suppliers. "Gazprom has an international reputation to maintain and we hope that it will continue to do so," said industry minister François Loos. "On the whole, we are confident that they will keep their contractual commitments."
- (Additional reporting, Financial Times service, Reuters)
