Maybe it’s the calm before the storm – literally. The price of oil has fallen over the weekend. It’s now $4 a barrel down on the prices seen in the middle of last week, but economists fear a new surge with black gold breaching the $80 level and hitting new highs.

First the good news. The crisis at BP’s Prudhoe Bay oil field in Alaska, which supplies 8 percent of the United States’ oil, is not as serious as first feared. It had been thought that corrosion in the pipelines was going to force the company to close the entire oil field down while the problem was fixed. But now it’s emerged that the western half of the giant oil field has not been affected. As a result, it will continue piping out 200,000 barrels of oil a day – that’s half the normal level.

But while the news from BP brought a shiver of relief, nervous economists, still working out the full implications of the latest terrorism developments, have a new cause for worry.

Soon, it will be the North American hurricane season, and if the US is hit anywhere near as badly as last year, oil will rocket in price.

The results of a survey amongst oil economists is due to be published this morning, and it’s thought the consensus will be that the price of oil will pass $80 a barrel by the end of the year.

It seems as though there’s one reason after another for oil prices to rise. Until recently we were told that the end of the US driving season would bring with it an easing of pressure on oil. Now we are told that, in fact, as the driving season ends, hurricanes could take up the slack. No doubt when the winds stop, they will be talking about a cold winter and how oil demand will rise in the dark winter months.

It is worth bearing in mind that the fundamental reason for the high proce of oil is down to high demand. Don’t blame it on under investment, supply is at an all time high. The fact is that, at the moment, the world is consuming unprecedented levels of oil, and, short of an economic slowdown, this can only continue.

It’s often argued that the rising inflation we are seeing at present is down to one-offs, – the high price of oil, for example, and that central banks are panicking and rising the rate of interest unnecessarily. After all, the purpose of rising interest rates is to reduce demand, which, in turn, reduces pressure on prices. The high price of oil is having this effect anyway, goes the argument.

But the counter argument to this is that the reason for the high price of oil is too high a demand in the first place; demand perhaps partially borne out of the consumer boom seen across the Anglo Saxon world earlier this decade. Therefore, by raising interest rates, central banks are indeed dealing with the fundamental problem.

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