oil prices have crossed $78 per barrel for the first time
ever as tensions continued to rise in the Middle East.
August NYMEX futures hit an all-time high of $78.40 and
are now trading at $78.16 per barrel in Asian trades.
major factor driving oil prices is rising tensions in
the Middle East. Israel attacked targets in Lebanon yesterday,
including the Beirut international airport, in a drive
against Hezbollah militants. More than 50 people have
died in Israeli attacks and Hezbollah retaliated by launching
rockets into Israeli territory.
started after an Israeli soldier was kidnapped by Palestinian
militants and Israel retaliated by moving into the Gaza
strip and attacking positions of the Hamas-led Palestinian
government. Many people lost their lives in these attacks.
few days later Hezbollah attacked an Israeli post, killing
three soldiers and capturing another two. Israel maintains
that Hezbollah is backed by Iran and Syria and markets
are worried that these incidents would worsen to a full
blown conflict. A military conflict with Iran and Syria
on one side and Israel, backed by the US, on the other
would disrupt oil exports from the Middle East.
Russia and China agreed to refer back the Iranian nuclear
dispute to the UN Security Council after Iran refused
to respond to a proposed peace package before mid-August.
Iran is the second biggest oil exporter among OPEC countries
and the country has often warned that it would choke oil
supplies if any action is taken against it.
worsen oil supply concerns, militants attacked two oil
pipelines in Nigeria and disrupted supplies. It is reported
that Nigerian exports has declined more than 1-lakh barrels
a day following the attack.
than expected decline in US stocks of crude oil and refined
products, as the summer demand is building up, is also
helping oil prices. The International Energy Agency (IEA)
said demand for oil would outpace supply growth after
a medium term decline in 2007.
India, the government would be forced to consider yet
another fuel price hike at the earliest. Such a move would
trigger another round of protests and threats from the
left parties who insist that the central government should
cut duties on petroleum products to avoid a price hike.
analysts now doubt the government''s ability to go ahead
with a fuel price hike after the embarrassment over suspension
disinvestment following threats from the left parties
and allies. The other option is to force PSU oil companies
bear the burden and slowly bleed them to near death.