“Exploration and production will benefit from higher prices and the stock market value of shares,” said a senior oil industry executive. “Refining profits will struggle because consumption will decrease and margins will be lower.”

Oil companies are scarred by the memory of the price crash that followed the rally of the 1970s when heavy investment in production flooded the market with new supplies. This time they have been slower to bring on more oil and the Organization of the Petroleum Exporting Countries (OPEC) has also been cautious about increasing output.

It has held its production targets steady since late last year and resisted a plea from top consumer the United States to raise output when it last met in March.

The group has repeatedly said supplies are adequate and that the market has been driven by speculation. According to that logic, adding more oil would not halt the rally, but others say it could send a powerful signal.

This week, just before U.S. President George W. Bush heads to the world’s biggest oil exporter Saudi Arabia, OPEC felt the need to issue a statement reassuring the market again there was enough oil, but saying it would act if necessary.

“The market needs something from OPEC and raising supplies could ease the price,” an OPEC insider said. The comment was the first in months to depart from the group’s line that the market’s momentum was a result of factors beyond its control.

OPEC countries are expected to earn more than a US$1 trillion this year from oil exports, the U.S. government has forecast, but they too are wary of demand destruction.

If prices continue to rise at the current rate, that possibility becomes more like a probability, with every US$10 rise in oil knocking about 0.25 percent off gross domestic product in developed countries, according to analysts’ rule of thumb.

“It is not in their (OPEC’s) interest to be one of the causes of a major world economic slowdown,” Batty said.

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