High oil prices are here to stay, according to Total, the French oil multinational, which has raised its forecast value of a barrel of crude from $40 to $60 as it predicts continuing strong demand for oil, rising costs and political constraints on production.

Total’s decision to bet on a higher oil price is based on fundamentals, said Christophe de Margerie, the chief executive, who said the recent turmoil in the debt markets had shaken most of the speculative money out of oil futures. Despite the loss of the hot money, the price of Brent crude was about $77 per barrel yesterday, close to its peak of $78.

“Demand is still strong in Asia, there is strong demand in the Middle East for electricity generation and water purification. The price will remain high,” he said.

The Total chief said that biofuels would not provide an answer for the world’s energy needs, insisting that hydrocarbons and, increasingly, nuclear power, would supply 80 per cent of the world’s energy for the next 50 years.

The French energy giant’s shift to a higher oil price scenario forced it to reduce by 20 per cent its production growth estimates for the period to 2010. The company also warned of significant cost inflation and the risk of project delays.

Rising costs have pushed up the oil price at which Total’s investments earn an acceptable return. The French company is putting more money into heavy oil and bitumen projects in Canada but the hurdle rate for such investments has risen from an oil price of $30-$35 per barrel to $50 per barrel.

Mr de Margerie said that the world must turn to Iran, where Total is considering a $10 billion (£5 billion) gas project. “We are not interested in a fight with the US Government,” he said. “This project has to fly one day. Everyone has to take responsibility if the world doesn’t have enough gas.”

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