Oil hits $104 as OPEC rebuffs Bush

Updated: 2008-03-06 11:38

Oil prices reached a record close, surging above $104 after OPEC decided Wednesday to keep its production unchanged. The cartel ignored calls from US President George W Bush to pump more oil into an ailing American economy.

Chakib Khelil, OPEC's president, said at a meeting in Vienna that the high price of oil was not due to a lack of supplies. Instead, he cited the "mismanagement of the US economy."

But the Organization of the Petroleum Exporting Countries was not completely oblivious to the political and economic impact of $100 oil. The sharp surge in prices recently has deterred the group's ministers from cutting their production.

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With the United States economy slowing down, oil prices have risen sharply as investors seek refuge in commodities like oil and other hard assets to offset the drop in the value of the dollar and hedge against inflation.

Oil futures settled at $104.52 a barrel on the New York Mercantile Exchange, up $5 on the day. The spike came after United States fuel inventories unexpectedly declined while tensions escalated between Venezuela, an OPEC member, and Colombia.

The close exceeded the inflation-adjusted record of $103.76 -- $39.50 at the time -- set in April 1980 during the second oil shock.

As prices have risen in recent years, relations between energy producers and their consumers have been increasingly acrimonious. Oil producers are seeking better terms for their dealings with foreign oil companies, and often restricting access to investments. OPEC ministers are also increasingly confident in their ability to prevent prices from falling below $80 a barrel.

As a sign of growing impatience with oil producers, President Bush said on Tuesday that it would be a "mistake" for OPEC not to increase supplies. As the oil group was meeting in Vienna, the president repeated his assault on Wednesday, saying it was "obvious" that demand was stripping supplies, and pushing up prices.

"America's got to change its habits; we've got to get off oil," President Bush said at a conference on renewable fuels. "Until we change our habits, there's going to be more dependency on oil."

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