Crude may be falling, but prices at the pump remain high

In London, early Tuesday trade saw the cost of a barrel of Brent crude - the benchmark price - slide more than $1.30 to $52.60 after a four-day weekend.

US prices closed at $53.68 on Monday, below the 17 March peak of $56.15.

Expectations of higher US interest rates have led speculators to switch their attention away from the oil market to focus on the rising dollar.

Reassurance on Monday from UK oil giant BP that an explosion at its Texas refinery a week earlier would not affect its US petrol (gasoline) supplies also eased upward price pressures.

The dollar reached a level of 107.38 yen in Tokyo on Tuesday morning, a five-month high, while Monday had seen the US currency reach its strongest level for six weeks against the euro.

Pressure

However, the oil price still remains almost 25% up on the beginning of the year, and demand remains strong.

In mid-March, Opec agreed to increase oil production by 500,000 barrels a day. There had been talk, particularly by Saudi Arabia, of raising production levels again.

China, where the breakneck economy has a growing thirst for energy, is forecasting a 10% rise in petroleum demand in 2005 with economic growth remaining close to 9%.

Some analysts have suggested China could impose a 20-50% tax on petrol in order to damp down retail demand - although industry is driving most of its energy usage.

In the US, meanwhile, the average price of gasoline has reached a new record of $2.15 a gallon, with the cost at the pump soaring way beyond that level in many high-demand areas.

Adjusted for inflation, however, US fuel costs remain well below the historic high of $3.08 a gallon reached in 1981.