Oil prices ended the year near $96 a barrel, or 57 per cent higher than where they began, and analysts expect rising demand and geopolitical instability to keep upward pressure on energy costs early in 2008.

"There's a good chance this week that we'll see some record highs," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

A record-breaking year for energy futures ended quietly on Monday, with oil futures declining 2 cents to settle at US$95.98 per barrel on the New York Mercantile Exchange.

Oil reached a trading record of $99.29 on November 21, and remains close to the range of inflation-adjusted highs set in early 1980.

Depending on how the adjustment is calculated, US$38 a barrel then would be worth US$96 to US$103 or more today.

Crude futures averaged US$-72.41 in 2007, compared with US$66.25 in 2006, and had their the biggest percentage gain since 1999, a year when prices more than doubled to US$25.60 a barrel.

Energy prices

Crude futures surged in 2007 as demand from booming economies in Asia increased.

Other factors influencing energy prices were the West's stand-off with Iran over its nuclear programme, attacks by Nigerian rebels on that oil-rich nation's crude infrastructure, and Turkish attacks on Kurdish rebels in northern Iraq, which sparked concerns that the rebels would retaliate by attacking an oil pipeline.

The recent assassination of Pakistani opposition leader Benazir Bhutto has exacerbated worries about global instability.

Higher prices are cutting demand growth.

The Energy Department's Energy Information Adminis-tration recently cut its global demand growth projections for oil to 87.2 million barrels a day from an earlier forecast of 87.5 million barrels a day.

The EIA left domestic gasolene demand growth projections for next year unchanged at 1 percent.

At the same time, the EIA estimated that oil prices will average nearly $85 a barrel in 2008, while U.S. gasolene prices will average $3.11 a gallon, peaking above $3.40 a gallon in the spring.

Combined profits

For oil companies, this hasn't been the bonanza one would expect. Oil companies buy the oil they refine into gasolene, diesel and heating oil, meaning they suffer if the price of those products doesn't keep up with the price of oil.

And while all three products rose sharply in price last year, those increases lagged oil's spurt.

The three largest U.S. oil companies, Exxon Mobil Corp., Chevron Corp. and Conoco-Phillips, had combined profits of US$50.3 billion in the first nine months of last year, a decline of 8.5 per cent from a year earlier.

Traders chalked up Monday's oil price decline to weak home-sales data - a concern for U.S. economic growth - and the stronger dollar. Crude futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

- AP