The threat to the West's fuel supplies

HERE we go again. A sudden 25% rise in oil prices on global markets is pushing up the cost of petrol and threatening the motorist and the trucking industry. The oil giants, never in a hurry to lower petrol prices when the market falls, have once again demonstrated their determination to profit as soon as energy bills rise.

Shell and Tesco, two of Britain's most profitable corporations, are first out of the traps. The big worry, though, is that this could be just the start of another period of high fuel prices and it comes at a time when the West's fragile economy was beginning to show signs of recovery.

Ostensibly the crisis has happened because traders who deal in oil on the global exchanges have become terrified by the unrelenting violence in the Middle East and President George W Bush's intended big push against Saddam Hussein.

All this comes when the world's leading oil producers have cut the amount available for export. Indeed, the modern successors to Sheik Yamani, the Saudi oil minister who held Western industrial nations to ransom in the 1970s, are showing few signs of capitulating to Western requests and opening up the spigots.

The underlying factor behind the rise in prices, which are now at their highest since 11 September, is the sharp recovery in the American economy since the start of the year. The oil price has climbed nearly $5 a barrel and it is currently trading at just under $24 a barrel.

Oil-producing states tightened their grip on supplies last autumn after the market price plunged to $16 a barrel because much of the Western world moved into recession. As a result, Opec has capped production at 21.7m barrels of oil a day, the lowest since March 1991. It has also persuaded non-Opec countries such as Mexico to go along with the restrictions.

Many of the Opec countries see higher oil prices as a chance to boost their own national treasuries. Their attitude places in jeopardy an informal deal between the main Western oil users (the Group of Seven richest industrial countries) and Opec, which guaranteed that the world price of oil would stabilise in the $18-$25 a barrel range.

Now, with energy prices rising and US consumers also hurting from gasoline and fuel oil prices, US Treasury Secretary Paul O'Neill has urged Saudi Arabia and the other Gulf producers to hold prices in this range. America is counting on the Saudis to be co-operative at a time when they are seeking to rebuild relations after the country's image was damaged by 11 September and the fact that Osama Bin Laden was a Saudi dissident.

In the long term, there are even bigger strategic worries. As US Vice-President Dick Cheney is in the Middle East trying to build a common front against Iraq, tensions across the region are rising. There is a risk that any war against Saddam will see him strike back at Gulf oil producers who sell to the West.

During the 1990 Gulf War, the world price of oil rose to $40 a barrel. This contributed to a worldwide economic slowdown and the defeat of President Bush's father in the 1992 US elections. There were also sharp price rises following the Yom Kippur war in the Middle East in 1973 and the Iranian revolution in 1979.

As the only wealthy nation self-sufficient in oil, Britain is usually the only winner among the Western countries when oil prices soar. It also reaps a higher price for its energy exports and the Treasury benefits from fuel duties and tax receipts from the North Sea oil producers. But it will not be very satisfying for the Government if the greater revenues come as the result of chaos in the Middle East. All it will be left with is alienated road users, falling consumer confidence and an economy on its uppers.