Is there any hiding from 2008's unstoppable increases in the price of oil?

For those of us old enough to remember the 1973 oil crisis, the price per barrel of oil looks set to touch the (inflation-adjusted) equivalent of those heady heights.  Yet this time, it's not an embargo causing the panic – it's our fickle friend, the global market.

And which one of us isn't in some way feeling the pinch, whether it's petrol at the pump or the rising costs of food and other commodities?

This week the price of Brent Crude (the most significant indicator of oil prices) rose another $4 to $146.34 a barrel in London.  To put that into some context, a year ago it was $80 and people had only just began to murmur about it breaking through the $100 barrier.

Meanwhile OPEC (a group that controls rather a lot of the world's oil supply!) believes oil prices could go as high as $170 a barrel in 2008, further adding to our woes.

The AA described the increases as "eyewatering", and estimates that a $2-a-barrel rise in crude oil will add an extra penny on fuel prices at the pump.  Unleaded petrol is currently around £1.19 per litre on average, diesel is £1.32, and they're still going up.  As a result of the rises, companies and consumers across the world have been suffering under the strain.

So what is keeping oil prices so high?  And is there anything we can do (apart from brace ourselves)?

1. FEARS OF DISRUPTION TO SUPPLY AND A GROWTH IN DEMAND

Growth of supply is not keeping pace with the growth in demand. Supplies from Russia and the Middle-East are thought to have peaked and finding new sources of oil is difficult and expensive.  Saudi Arabia is thought to have some excess capacity, but is reluctant to boost output substantially.

The demand for oil has also risen by about 3 million barrels a day since 2005 and is expected to rise further, with growth being driven by the rapidly expanding Chinese and Indian markets.

2. WEAK US DOLLAR

The jump in oil prices since 2005 has coincided with the value of the dollar decreasing substantially against other leading currencies.

Financial investors look elsewhere for investment opportunities and oil is often a safe bet – this is compounded by the fact that oil is traded in dollars and so makes oil cheaper to buy.  Some analysts believe the US economy is on the brink of a recession and so this has further undermined the dollar – in turn giving oil prices another boost!

3. POLITICAL INSTABILITY

Much of the world's oil is concentrated in volatile regions, for example Nigeria and the Middle East.  The instability drives fears of unpredictable disruptions to supply.

Tensions over Iran's nuclear programme are simmering away, and if Israel were to attack Iran's nuclear installations this would cause disruptions to the strategically vital Strait of Hormuz – used to ship 40% of the world's oil.

4. MARKET SPECULATION

Oil exporters say the price of oil is not just due to the basics of supply and demand.  Many point the finger at futures traders, who make huge amounts of money speculating on the direction of oil prices. This speculation is currently being investigated by US regulators who are looking for evidence of market manipulation and the IMF who is examining the role of traders in the price spike.

So in short, unless you’re a market speculator or a Middle Eastern politician, there's probably not a lot we can do about the price rises themselves – it seems there's not even much our own Government can do.  Or has the time really come where we've simply got to depend less on oil?

As you can see, the reasons are pretty complicated and it's not a simple question!  But if you have a brainwave, do let us all know in the comments below...