Producers of coffee, copper or cotton would love to do the same, but can only look on in envy. Attempts to stabilise prices of other market-traded commodities at a profitable level have ultimately failed, because producers lack clout.

Opec is more powerful because a few producers around the Gulf have the capacity to adjust output of their state operations at will. Decisions are made by a handful of like-minded people.

Even so, Opec has carried influence only intermittently, usually when world economic conditions are benign. The cartel, which would be illegal in the private sector, failed to stop Brent crude dropping from almost $30 a barrel to less than $10 in the few months leading to the summer of 1986. They did not stop a fall from $25 to about $10 in 1997-98, or a decline from $35 in 2000 to about $18 in 2001.

After a price peak of 1979, the Gulf producers also learnt the limitations of their powers, even at times of high demand. The global recession that was triggered by the price ultimately proved as painful for oil-based economies as for anyone else. That is why the organisation finally opted for a target range, still between $22 and $28 a barrel, on a weighted basket of crudes that is not dissimilar to Brent. The European benchmark yesterday hit $43.80 a barrel.

This summer, as oil price graphs have soared like gushers, Opec has found itself in the unusual position of trying to talk prices down. Purnomo Yusgiantoro, Opec’s Indonesian president, insisted yesterday that output was still rising.

Even without Iraq, it would be quite enough to meet predicted world demand in the final quarter of this year and into 2005. Meanwhile, US stocks were gratifyingly high for August, suggesting there was no imbalance to justify prices going up further.

In the short term, however, Opec has lost its pricing power. Although it underestimated demand from China and India last autumn, the cartel is now pledged to pump as much oil as the varied competence of its members will allow. It is now reduced to trying to absolve its members from blame for the economic damage that is beginning to surface.

Global growth is likely to be about 0.5 percentage points lower if Brent stays above $40per barrel. Forecasts of growth in Asia this year have been trimmed from 6.2 per cent to between 5.2 and 5.7 per cent. German and Japanese industrial exports, the main hope for a revival in those key economies, are feeling pressure.

Speculators are to blame, Mr Yusgiantoro claims, and he is right. Traders at banks, commodity houses and hedge funds are riding the oil price for all it is worth. It is the only show in town. Producers, users and investors want stability in markets. Traders need volatility to make the big money they have become used to.

The foreign exchanges are deadly dull — just the way end users want them — as are debt markets. Shares have oscillated in a narrow range. Hedge funds collectively have made no profits since the spring. So financial traders love oil and will not let go in a hurry.

City traders have suddenly become experts in the nuances of Iraq’s inter-communal negotiations. They say Iraq’s remaining Gulf exports, already down to half their normal flow, look dodgy. Yukos, which has little option left than to play brinkmanship with its Russian state tormentors, helps speculators talk up a break in Russian supplies.

There is even talk that freak El Niño-style storms could boost winter demand. Oil price bulls note that US commercial stocks have fallen again, although this seems to be explained by temporary disruption during Hurricane Charley. Demand has scarcely been affected by the price, so it is bound to rise further until it really hurts. When that happens, prices could fall as fast as they have risen.

Traders can hold the world economy to ransom because short-term demand and supply are inflexible, but also because they dominate dealings on oil markets. Genuine market oil deals are the exception. Saudi Arabia insists that all its output is sold on contract and none goes through open markets — even if this is not strictly true. The tail wags the dog in many commodity markets, wildly exaggerating the ups and downs of demand and supply. In oil markets, the tail wags an elephant.

Speculative trading is necessary because it maintains a liquid market. In many of today’s exchanges, however, financial trading is so dominant and derivative hedging so complex and voluminous that the function of matching ultimate buyers and sellers at a price that clears the pool has become peripheral.

Prices approaching $45 a barrel in non-extreme conditions make no more sense to real people than $10 a barrel. But wild swings suit speculators. When trading strategists drive the living standards of billions, the global financial system is sick.

graham.searjeant@thetimes.co.uk

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