Explosion of the price of crude means inflation through the roof

• The quotations of grains, which until recently bore the brunt of the blame for rise of the price of food are now dropping

The price of Brent crude yesterday climbed to the highest level of the last 30 months, on the London market, as the violence of Libya have caused deliveries of oil from this country to drop. The recent shock on the market for crude will fuel inflation around the world.

In London, the price of crude got close USD 120/bbl, amid speculation that Libya lost about two thirds of its output of oil, and in New York, the price rose above USD 100 / bbl.

On the ICE Futures Europe of London, the price of oil with April delivery rose USD 3.42 (3.1%), to USD 114.67 dollars/bbl, after previously reaching USD 119.79 dollars/bbl - the highest level since August 21st, 2008. This week, the price climbed over 10, and over 20% in the past month, amplifying the fears over accelerating inflation.

On the New York Mercantile Exchange, the price of oil with April delivery rose USD 1.69 (1.7%) at 09.53, reaching 99.79 USD/bbl. Prior to that, the quotation had reached USD 103.41/bbl - the highest level since September 29th, 2008.

On Wednesday, Japanese brokerage firm "Nomura Holdings" Inc. predicted that oil could rise to USD 220 /bbl on the London exchange, if Libya and Algeria stopped production, due to the spread of violence in the region.

Libya, which produced almost 1.6 million barrels a day, is a member of the Organization of Petroleum Exporting Countries (OPEC), and its exports are mostly going to Europe. Libya has the greatest oil deposits in Africa.

Analysts estimate that the daily output of Libya dropped by almost 1 million barrels, as the major companies in the region halted their operations.

It is worth mentioning however, that an official of Saudi Arabia yesterday said that his country and other OPEC member countries can replace the lost Libyan oil. The officials of oil company OMV AG said that its refineries in Austria, Romania and Germany get about 20% of the oil intended for processing from Libya, but the reduced deliveries from that area can easily be compensated with fuel from other countries and regions (Kazakhstan, Nigeria and the Black Sea).

• The rise of the price of energy will affect the consumption of grains

Traders are currently speculating that the rise of the price of energy will affect the expansion of the economy, namely the demand for grains, which makes the price of grains on their respective markets continue to decline.

The price of wheat with delivery in the month of May dropped 5.75 cents (0.7%) yesterday, at 08.14, on the Chicago Board of Trade, to USD 7.92/bushel (one bushel = 27 kg). The price of corn with May delivery fell 2 cents (0.3%), to USD 7.25/bushel, whereas soy dropped 9.25 cents (0.7%), to USD13.2225 /bushel.

The price of wheat lost 10% on the Chicago market after February 18th, whereas oil rose about 20% during the same period.

Last month, the quotations of grains had an upward trend, as the states of Northern Africa and the Middle East imported large volumes, since the prices were raising on their domestic markets.

According to the US Department of Agriculture (USDA), countries in Northern Africa and the Middle East will buy 39.4 million metric tons of wheat in the harvest year 2010-2011, which would represent 32% of the total global purchases.

The prices of grains remain high, even though they have been on an downward trend lately. Over the past year, the price of corn rose 95%, wheat rose 71%, and soy climbed 44%.