The price surge came shortly after US Federal Reserve chairman Alan Greenspan on 15 October warned of serious consequences to the US economy if prices continued to climb. ‘So far this year, the rise in the value of imported oil – essentially a tax on US residents – has amounted to about 0.75 per cent of GDP [gross domestic product],’ he said. ‘The impact of the current surge in oil prices, though noticeable, is likely to prove less consequential to economic growth and inflation than in the 1970s.’

The focus of concern is US upstream production. Facilities in the Gulf of Mexico have been operating at 73 per cent of their normal combined production capacity of 1.7 million barrels a day (b/d) due to damage caused by Hurricane Ivan in September.

Several fields are expected to remain closed until early 2005. As a result, heating oil stocks stand at 50 million barrels – 10 per cent less than the same period in 2003, according to US inventory data released on 14 October.

The shortages in the American market have been compounded by similar supply concerns in Europe and South-East Asia. Kerosene stocks in Japan, already standing at 15 per cent less than October 2003 levels. Supplies are expected to be further dented following a fire at a refinery operated by Nippon Oil Corporation on 16 October.