When the International Energy Agency last week cautioned that high oil prices could be here to stay and called for greater energy efficiency and the promotion of alternative energy sources, its warning had a decidedly 1970s feel.

The oil price last week set a new high, in dollar terms, above $54 a barrel. The IEA, the Paris-based organisation that acts as an energy market watchdog for oil importing countries, believes this does not merely reflect speculative trading activity and concerns about stability in the Middle East but rather the fundamental balance of supply and demand. Rising global demand for oil has been driven by strong economic growth in the US and China, while limited capacity in production and refining leaves the oil market vulnerable to shocks and price surges.