Why Big Oil is not to blame for fuel prices

It is the same every time the price of oil rises. Television news editors send camera crews off to garner driver rage at the pumps. Green activists rant about capitalist fat cats. Government ministers - convenient amnesiacs when it comes to who takes almost 70 pence in the pound at the pumps - make dark mutterings about windfall taxes. All because of the erroneous belief the oil companies need 'reining in'.

But anyone with an understanding of basic supply and demand economics knows well enough that Big Oil is not the big player in the energy market. More often than not the oil majors are just as helpless in the face of global market forces as any other consumer.

Why are energy prices sky-high? In a word: geopolitics. The rapidly expanding economies of China and India, with a joint population of over 2 billion, have become increasingly voracious consumers of energy. China's

economic growth alone is running at nine per cent and, over coming years, will only accelerate. The consequent rise in productivity has brought the Far East consumer into direct competition with Western oil consumers as never before.

Then there is the increasing political unrest in the Middle East, still the world's largest supplier of oil. Russian Gazprom's muscling out of BP and other foreign-owned investments has not helped much, either. Problems with Nigerian and Venezuelan oil (the USA's largest supplier) have all colluded to drive up prices with speculative investors making a tidy profit. And, let's face it, Opec's petro-dollar-rich sheikhs have - as in the 1970s - been reluctant to aid their Western 'partners' in this latest energy scrape.

The fact is that the days of cheap and easy-to-tap oil reserves are mostly gone. It is becoming increasingly expensive to get more of the black stuff out of the ground. So, if the oil is running out, the question is what the West can do to get a handle on prices once more.

But who said the oil was running