Price of carbon spikes as oil hits record high

The price of carbon credits in the European emission trading scheme (ETS) hit an 11-month high yesterday as record oil prices forced the cost of EUA credits skywards.

Crude oil prices reached a record $117 a barrel with some analysts claiming prices could hit $125 a barrel later this year.

The prices represent a dual blow for European energy firms with the rising cost of oil leading to an increase in the price of carbon credits.

"Increases in the price of oil makes it more expensive to produce gas, which in turn makes coal a more preferable energy choice," explained Kjersti Ulset, manager at research firm Point Carbon. "As coal releases higher levels of carbon that means the demand for credits will increase, hence the increase in prices."

She added that in the short term the price of carbon would continue to fluctuate in relation to the prices of other types of fuel and weather conditions, but predicted that in the longer term prices will maintain an upward trend. "The long term outlook is for prices to keep rising and they could double from the current level by 2020," she said.

Meanwhile, a major new global poll has revealed that the majority of people are now resigned to ever rising oil prices, believing that oil supplies have peaked.

The survey from WorldPublicOpinion.org polled almost 15,000 people in 15 countries and the Palestinian territories. It found that on average 70 per cent of respondents oil is now running out. In contrast only 22 per cent believed oil would remain as the world's primary fuel source in the coming years.