The price of oil today reached the landmark $100 dollars per barrel for the first time in history.
The New York Mercantile Exchange (Nymex) confirmed the milestone transaction for crude which analysts said was prompted by a weak dollar, unrest in parts of the world and concern for declining US oil stocks.
The dollar continued to fall today as figures showed US manufacturing tumbled to its lowest level since April 2003. The news stimulated increased expectations for more Federal Reserve interest rate cuts.
"Higher oil prices lead to a slower economy, lower interest rates and higher inflation," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
Analysts that the rise would continue over the next five years as demand increases due to global economic development, falling production in some non-Opec states and a strain on refineries to make fuels from crude.
Kris Voorspools, analyst at Fortis in Brussels said: "It's simple supply and demand fundamentals. Demand is going up and I think there is a structural problem with the refining sector. There's higher demand for higher-quality products and refineries are simply not up to making those kinds of products."
The surge to $100 has brought oil near the inflation-adjusted record peak of $101.70 hit in 1980 when war between Opec members Iran and Iraq triggered a supply crisis.
Supply restraint by Opec (Organisation of the Petroleum Exporting Countries) helped prices to rise by nearly 58 per cent last year, the biggest annual gain this decade.
Opec, which provides more than a third of the world's oil, says it cannot do much to lower prices because most of its 13 members are producing at full capacity.
The world economy has coped with rising oil prices but some analysts fear the latest surge will slow growth and curb demand.
Nauman Barakat, senior vice president at Macquarie Futures USA said: "Prices could be a lot higher because of continued strong demand from Brazil, India and China, but on the other hand they could be a lot lower because these kinds of high price levels could cause a global recession."
The International Energy Agency, in its annual World Energy Outlook in November maintained a forecast for global oil demand growth of 1.3 per cent a year to 2030 but it raised its price forecasts.
The agency, adviser to 27 industrialised countries, said a supply crunch in the period to 2015, causing an abrupt price rise, could not be ruled out.