Industry around the world is holding its breath as the price of crude oil hits record highs in New York and gains in London, as concerns about supply and security persist.

US light crude closed at $41.38 a barrel, soaring 30 cents on the previous day. In London, Brent Crude climbed to $38.40, reaching levels last seen following Iraq's invasion of Kuwait in 1990.

Global demand for oil has never been higher, lifted to unmatched levels by heavy consumption in the US and fast-growing China.

The decision made by several large consumer countries - to stockpile oil in light of the ongoing uncertainty in Iraq - has only served to stretch supplies further and drag prices higher.

Economists are warning about the effects of higher raw material costs on economic and profit growth.

World crude prices have now added more than 25 per cent in the last year. "If you look at the way this market is rallying, it's been broad-based and gradual, relentlessly going higher," said Dennis Kongsiri of Mitsui & Co.

However, in real terms, oil prices remain far below the levels they reached during the late 1970s and early 1980s, when output restrictions by producers' cartel Opec caused serious shortages.

Opec is considering a proposal from Saudi Arabia, the world's biggest exporter, to raise output by 1.5 million barrels a day.

But Opec president Purnomo Yusgiantoro said that members were already producing well above their quotas and that an extra two million barrels per day - 2.5 per cent of worldwide demand - is being produced without affecting prices.

Most analysts believe that oil prices will remain at these levels and above for months.

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