The rise has been sudden and dramatic. Early this year a lone trader in New York pushed the price of oil above $100 a barrel for the first time, taking the world into a new era.

It did not last, sparking suggestions that the trader had ensured his place in history but very little else. Then, a few weeks ago, the upward march began again. Last weekend, with oil markets twitchy about the closure of the Grangemouth refinery in Scotland and a dispute affecting Nigerian oil output, prices came within a whisker of $120 a barrel.

The president of the Organisation of Petroleum Exporting Countries (Opec), the Algerian energy minister Chakib Khelil, helpfully added to the mix by suggesting that the price could hit $200 as investors fled the weak dollar.

As it turned out, prices spent much of last week slipping back, dropping to just above $110. But on Friday they were up again, responding to Turkish airstrikes on Kurdish rebels. Oil is a great barometer of international tension.

Is the head of Opec right about a $200 oil price? Will a more realistic target, $150, be reached this year and what would be the consequences of that for the economy? Why has oil been surging anyway, doubling in price in a year?

The rise in oil prices reflects a series of factors. In the 1990s, China was an oil exporter, capable of fuelling its own economic boom. Now, apart from being the world’s second largest consumer of oil, it is also a big importer.

Opec, which five years ago had a target range for oil prices of $22 to $28 a barrel, appeared initially worried when the price began to rise sharply, its members fearing that a sudden climb would be followed by a precipitous fall.

Now Opec, and in particular normally moderate voices such as Saudi Arabia, has changed its tune. Some attribute this to the cooling of relations between the mainly Arab Opec members and George Bush’s America in the wake of the Iraq war. Bush’s State of the Union address of two years ago, when he declared his aim of ending US dependence on imported Middle East oil, also rubbed the producing countries up the wrong way.

The result is that even Saudi Arabia appears happy with $100-plus oil, insisting that the market is well supplied and refusing to turn on the taps.

The fundamental question about whether oil prices will rise further is one of supply and demand. Over the past four years the global economy has been growing at its fastest rate since the early 1970s, pumping up demand for oil. Even the slowdown now under way will leave it relatively strong, according to forecasters.

The supply of oil, however, has risen more slowly, either because of production cuts by Opec, political problems or as a result of a lack of investment during the years when prices were very weak.

Adding to this, in the months since the credit crisis broke last summer, is the fact that investors have seen oil and other commodities as “safe haven” investments. Lehman Brothers, the investment bank, calculates that 20-30% of the current oil price reflects speculative demand from investors. That means the price could fall when this “hot” money is moved elsewhere, though most experts thinka price of around $100 is likely for some time.

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