A single bargain struck by a trader on the floor of the New York Mercantile Exchange and the world is talking about $100 oil. It was a lone deal in the smallest volume permitted by NYMEX - 1,000 barrels - struck at a large premium to the prevailing price, but it screamed down the newswires and the world caught its breath.

It was bound to happen. The US Light Crude futures price has been bobbing around the mid $90s for weeks and traders were waiting for the spark - a kidnapping in Nigeria, more explosions in Iraq - that would send it skittering above the $100 milestone. Today it subsided back a few cents below the three-digit level. But the real nagging concern for everyone, from the Lincolnshire farmer filling up his tractor to the chief executive of British Airways, worried about his enormous jet fuel bill, is whether $100 per barrel is a price peak or a trading range.

There is no immediate problem with supply - refiners are not going short of stocks of crude oil. These price surges have everything to do with speculative bets by hedge fund managers who have decided that the global supply of crude has peaked or is near its peak and they are gambling that occasional supply disruptions will create periodic bouts of scarcity. What they are choosing to ignore is demand destruction. The oil price has tripled since the beginning of 2004 and at $100 per barrel the cost of crude is now at a real record as well as a nominal price peak. In other words, oil is now even more expensive than it was after the Iranian Revolution in 1980, expressed in today's dollars.

That inflation cannot be without economic consequence and if you believe that the global economy is in worse shape today than it was a year ago, you cannot at the same time believe that the oil price can continue its upward surge. It is true that the world is more efficient in its use of energy today than it was in 1980 and in Britain we have been shielded to some extent by the fall in the dollar which makes barrels of crude a bit cheaper. However, Americans are not spared; they are suffering a massive bout of financial indigestion due to the credit crunch. US unemployment is rising and the car manufacturers are expecting dire sales figures for the final quarter of this year. This is not the stuff of happy motoring. Figures from the US Department of Energy show a continuing slowdown in the growth of fuel consumption over the past year.

Oil price bulls will argue that this ignores soaring oil consumption in the Far East. China's galloping growth has been the biggest factor propelling oil upwards over the past three years and India is in hot pursuit. The Gulf states, too, are becoming big oil consumers as well as producers but there is another factor at work here: subsidies. The true cost of oil is hidden in most emerging markets. China and India both regulate the price of fuel, protecting consumers from the full effect of the global market for oil. The Chinese price controls play havoc with their refinery sector and the Indian fuel subsidy costs the government billions of dollars. The real question is at what point these countries retreat from or abandon their attempt to manipulate energy prices.

For richer nations, $100 oil is a threat to prosperity but for many in developing countries, the full cost of that inflation implies not discomfort, but misery. This oil price will certainly kill off the small green shoots of development in sub-Saharan Africa and it could, if sustained, cause the Chinese locomotive to slow. If that happens expect a rapidly falling oil price by the year end.