The president of Opec has predicted that the price of oil could stay as high as $110 a barrel for the rest of the year, spurred by investors seeking to hedge themselves against the weakening US dollar.

Chakib Khelil, the president of the global oil cartel, who is also the Algerian Energy Minister, said: “There are big pressures on Opec and some consuming nations would like to present Opec as being behind current high prices.

“But the truth is that the current prices are linked to US economic problems as well as to the value of the dollar.”

His comments came after Dick Cheney, the Vice-President of the United States, met Saudi leaders in Riyadh to discuss soaring oil prices. Mr Cheney has urged Saudi Arabia to boost production in an attempt to ease the price of oil.

There are hopes that a recession in America and moves by China to reduce economic growth will lead to a fall in demand for commodities such as oil and result, in turn, in falling oil prices.

Opec left oil output levels unchanged this month despite calls from oil-consuming nations to increase production. A week ago, the price of light sweet crude futures hit $111.80 a barrel, a record, but it has eased since amid evidence that the American economy may already be in recession.

The rising oil price is also creating problems for Saudi Arabia, the world’s largest oil exporter. Last month, inflation in the country hit a 27-year high, at 8.7 per cent. Last week, Saudi Arabia’s central bank and the United Arab Emirates cut interest rates by three quarters of a percentage point, in line with the US Federal Reserve. Yesterday, Qatar – where inflation is 13.74 per cent – followed suit.

The Gulf states face an uncomfortable dilemma. As demand for oil soars, Gulf Arab economies are booming, driving demand for everything from housing to power and water. However, instead of raising interest rates to try to stem rising inflation, countries such as Saudi Arabia have been forced to follow the Federal Reserve’s cuts because their currencies are pegged to the US dollar.

After the meeting with Mr Cheney, the Saudi Supreme Council of Petroleum and Mineral Affairs, which is chaired by King Abdullah, expressed “its satisfaction at the Kingdom’s work in expanding crude production and refining capacity to help meet global demand”.

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