Just as oil at last year’s peak of $147 looked excessive, so oil at last year’s low of $34 looked unlikely to last, the company's chief economist Ian Stewart said in an internal company briefing.

"It looks as if oil prices have moved to a permanently higher level relative to the 1990s where an average of $16 per barrel prevailed," he said.

Stewart pointed out that the doubling of the oil price this year seems to be part of a wider move back towards higher risk assets and that since March rising optimism about the global economy has also pushed up prices.

“On one level a surging oil price looks odd given that oil stocks are at high levels and demand is continuing to fall as the global economy contracts,” Stewart said.

“Yet the factors which drove up the oil price last year are still in place. Supply is constrained by underinvestment and a shortage of skilled workers.”

Despite much higher oil prices the International Energy Agency reckons investment in the oil sector will fall by 15% to 20% this year.

On the demand side, the rise of China and other emerging economies has created a huge new source of demand for oil. Last year, for the first time, oil demand from developing countries, including China, outstripped demand from the industrialised world.

However, Stewart said some factors will operate to restrain energy demand in the medium term. Energy efficiency should continue to improve driven by the search for cost savings and the imperative of global warming.

Since 1970 technological improvements have reduced overall energy demand by 56% from what it would have otherwise been.

For some Western countries, particularly the US, reducing dependence on oil imports from potentially unstable or unreliable providers is seen as a policy priority.

And, slower world population growth, forecast by the World Bank to average 0.8% a year in the next 20 years compared to 1.2% in the last 10 years, should slow energy demand, Stewart said.

Published: 15 June 2009 12:01 GMT  | Last updated: 15 June 2009 12:28 GMT