TEHRAN, Oct 20: Iran’s caretaker oil minister said oil was “still cheap” because, when adjusted for inflation and the weak US dollar, the “real value” was almost half the record of $90 a barrel hit in the past week, a newspaper reported.

US crude oil prices struck a record of $90.07 on Friday, spurred by winter supply worries and the weakening US dollar. But adjusted for inflation, it remains below the 1980 peak of $101.70 a barrel, the International Energy Agency says.

Following the increase in oil price, Nozari announced: Oil is still cheap, the government-owned newspaper called Iran, said in a headline of a story quoting minister Gholamhossein Nozari.

In the story, the minister was quoted as saying: If we calculate the oil price based on the 2002 index, its real value will not be more than $47 a barrel because of increasing inflation and the decreasing value of the (US) dollar.

Other Opec oil ministers have also noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.

The fall in the value of the US dollar against other major currencies has helped drive buying across commodities, as investors view dollar assets as relatively cheap, analysts say.

It has also reduced the purchasing power of revenues for members of the Organization of the Petroleum Exporting Countries and increased the purchasing power of some non-dollar consumers.

The group’s Opec reference price in nominal terms was $74.18 in September, but was valued at $50.98 when adjusted for inflation and the weak dollar.

Some Opec ministers have said pumping more oil will not help cool prices they say are being driven by factors such as Middle East tensions -- including worries about Iran’s row with the West over its atomic programme -- and speculative activity in the futures market, rather than supply shortage.

Saudi Arabia, Opec’s biggest producer, was the driving force behind a 500,000 barrels per day supply increase from Nov. 1.

Other members such as Iran and Venezuela opposed the move until the last minute during a meeting in Vienna.

---Reuters