Oil price increases of 2004 and 2005

Oil price in 2003-2005 Average US retail price of regular unleaded gasoline Oil prices from 1860-1999 in 1999 dollars. Source: [1]

The price of standard crude oil on NYMEX was under $25/barrel in September 2003. By August 11, 2005, the price had been above $60/barrel for over a week and a half. A record price of $70.85 per barrel was reached on August 29, 2005.[2] While oil prices are considerably higher than a year ago, they are still roughly 25$ from exceeding the inflation-adjusted "peak of the 1980 shock, when prices were over $90 a barrel in today’s prices" [3].

In the United States gasoline prices reached an all time high during the first week of September 2005 in the aftermath of Hurricane Katrina. The average retail price was nearly $3.04 per gallon. The previous high was $2.38 per gallon in March 1981, which would be $3.03 per gallon after adjusted for inflation.[4][5]

Demand

High demand is led by the U.S. market, the source of an increasing percentage of the world's demand for petroleum. The U.S. economy currently accounts for one-quarter of all demand. New demand is also coming from emerging industry in third world nations, including India and especially China which is developing a western-style car culture and whose manufacturing bases have grown very rapidly in recent years.

Sources of the world-consumption-increase in 2004 compared to 2003 (total increase of 3.4%), according to U.S. Department of Energy Energy Information Administration estimates: [6]

  • China: 38.9%
  • US: 19.4%
  • Asia outside Japan and China: 13.8%
  • Canada: 4%
  • UK: 3.5%
  • combined other non-OECD: 21%

Note: the total percentage exceeds 100 because the overall demand from all other countries decreased during the same period..

Supply


There are a number of reasons why oil traders feel that oil supplies might be reduced. One of the most important is growing turbulence in the Middle East, the world's largest oil producing region. The war in Iraq, Iran's nuclear program, and questions about Saudi Arabia's internal stability all could in the future lead to a dramatic fall in the supply of oil. Outside the Middle East other oil producers have worried investors such as the strikes political problems in Venezuela and potential instability in West Africa.

In late August, 2005, Hurricane Katrina crippled the supply-flow from off-shore rigs in the Gulf Coast, the largest source of oil for the domestic U.S. market. Short-term shutdowns because of power outages knocked out two major on-shore pipelines, and at least 10% of the nation's refining capacity was not operating in the wake of the storm. Gas prices in the region, normally 70 cents below the national average, were at $3.12 on August 30.[7]

World supply (specification) came in at 83 million barrels a day during 2004 in department of energy EIA calculations ([8]). This rate of increase is faster than that of any other date in the past. Despite this there is increasing discussion of peak oil and the possibility that the future may see a reduced supply of oil. Even if oil supplies themselves are not reduced, some experts feel the easily accessible sources of light sweet crude are almost exhausted and in the future the world will depend on more expensive sources of oil.

The short term price of oil is partially controlled by the OPEC cartel and the oligopoly of major oil companies. One other important cause is the United States dollar's slump against the Euro. Since oil is traded in dollars, the price must increase for OPEC to maintain buying power in Europe.

Causes

Some people and news agencies argue that labor strikes, hurricane threats to oil platforms, fires and terrorist threats at refineries, and other general problems are responsible for the higher gas prices. Critics argue that these problems periodically push price higher, but that they are not fundamental or long term enough to cause the large jump in gas price. A more fundamental problem that some believe is causing the price to rise is the probability of peak oil already or soon to be reached. Not only is there a limited amount of fossil fuels which have been burnt as fuel, but however much remains will be used faster by a growing industrialized world population and what remains will be more dificult to get since the easiest wells have been tapped and the remaining sources will be fought over in resource wars.

Others believe that the price of oil is almost entirely speculative, and that the increase in price is due to oil speculation extending into the long term. These people argue that speculators foresee increasing demand, decreasing supply, or both, leading to a long term increase in the price of oil. If these speculators are wrong, current prices may actually be a price bubble, and the price could thus collapse. A July 14, 2005 Morgan Stanley report[9] suggests that opinions of the oil market could burst just like a bubble if indications of declining Asian demand continue.

Still others suggest that the main issue is a lack of energy efficiency in industry. These analysts believe the problem would be solved by increasing the efficiency of factories, homes and transportation and easing the demand crunch by using less energy and more renewable energy.

Spring & Summer 2005 increase

Overnight gas price hike shown at a Chicago area bp station (background). The Shell station (foreground) has not yet posted the 12 cent price hike.

After retreating for several months during the winter of 2004/2005, prices rose to new highs in March 2005. The price of light, sweet crude oil on NYMEX has been above $50/barrel since March 5, 2005. On March 16, 2005, the price surpassed the October 2004 high of $55.17 to close at $56.46. In April 2005 the price began to fall, reaching $53.32 on April 9. It then reversed course and headed to an all time high of $58.28, driven mainly by lingering concerns of a prolonged weak dollar. In June 2005 crude oil prices surged to record highs eventually breaking the psychological barrier of $60.

Saudi Arabian King Fahd's death on August 1, 2005, meant a new regime that may be less amicable to U.S. influence. During mid-August, with a string of refinery snags (fires/other deterrents to oil refining), shrinking gasoline inventories, and a growing thirst for oil by American consumers, New York Mercantile Exchange traded crude oil futures surged past the $66 mark and briefly touched $67/barrel. Over the course of three weeks leading up to August 10, crude oil prices had risen by 13%.

While the street price of gasoline usually corresponds to the price of crude oil, refinery capacity can become the governing factor, particularly during periods of high demand. In addition, there are different grades of oil and each refinery is typically configured to process a narrow range of grades. As a result, shortage of a particular grade of oil can keep street prices high, even when overall supply exceeds demand.

Winter 2006 increase

On January 17, sweet crude oil for February delivery rose by $2.38 (3.7%) to $66.30 a barrel. This was the highest increase since early October 2005. Observers believe that violence in Nigeria, and Iran's friction with the West are responsible for this price increase. Continued concerns about Iran raised the price to $68.38 on January 31.[10]

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Hurricane Katrina

Gas price hike shown at a Shell station.

Hurricane Katrina had a major impact on oil and gas prices, especially within the United States. The Gulf Coast is home to a major portion of America's refining capacity. The port of Louisiana is one of its most important inlet for oil imports, and the gulf itself is a major oil producer. Port Fourchon has also suffered long term damage. Louisiana Offshore Oil Port has not. [11]

Gas prices soared after the closing down of the major pipelines connecting the gas of the Louisiana region to the entire East Coast. In Stockbridge, Georgia, regular gas prices came to $5.87 at a BP station. Shortages were feared or experienced in several states including Tennessee [12], Alabama [13], and South Carolina. [14] Many of these were blamed on panic buying. Airports began to report shortages in aviation fuel on 2 September.[15] A shortage could lead to a decrease in food production.[16] Higher prices for heating oil and natural gas were expected as the winter heating season set in.[17]

On 5:10 p.m. EDT, on 31 August, President Bush announced the Energy Department was approving loans from the Strategic Petroleum Reserve and that EPA announced nationwide waver on fuel blends. Bush stated, "This storm has disrupted the ability to make gasoline and deliver gasoline," and "This is going to be a difficult road."[18] Many people have observed however that stores of crude oil do little to address inadequate refinery and distribution capacity.

In order to stabilize world energy supplies, the International Energy Agency offered to sell two million barrels of crude oil and other refined products from national supplies. These supplies would begin entering the US markets within two weeks of 2 September. [19] [20] The press release from the IEA states, "... the implications for the oil market are global."[21]

Effects

There is controversy regarding the potential effects of oil-price shocks. Some see these increases in the price of oil leading to a recession comparable to those that followed the 1973 and 1979 energy crises or a potentially worse situation such as a global oil crash. Most economists see this as unlikely, partly because all developed countries have high fuel taxes that decrease as oil prices increase and can be eliminated in the event of a dramatic price spike. Nevertheless, that loss of revenue would put a strain on government balance sheets. The American Strategic Petroleum Reserve could on its own supply current U.S. demand for about a month in the event of an emergency, unless it is also destroyed in the emergency. This could well be the case if a major storm were to hit the gulf, where the reserve is located. While total consumption has increased [22], the western economies are less reliant on oil than they were twenty-five years ago, due to substantial growths in productivity. In the United States, for instance, each $1000 dollars in GDP required 2.4 barrels of oil in 1973 when adjusted for inflation this number had fallen to 1.15 by 2001. But oil's historically high ratio of Energy Returned on Energy Invested continues a significant decline. Despite the rapid increase in the price of oil, neither the stock markets nor the growth of the global economy have been noticeably affected. Inflation has increased. In the United States, the Consumer Price Index rose by 0.6% compared to 0.2% for September. This was driven by a 4.2% increase in energy costs. As a result during this period the Federal Reserve has rapidly been increasing interest rates to curb inflation.

Economists say that the substitution effect will spur demand for alternate energy sources, such as coal or liquified natural gas. For example, China and India are currently heavily investing in natural gas facilities. Nigeria is working on burning natural gas to produce electricity instead of simply flaring the gas. Outside the US, more than 50% of oil is consumed for stationary, non-transportation purposes such as electricity production where it is relatively easy to substitute natural gas for oil.

The increased price of oil also makes previously impractical sources of oil attractive to businesses. The most prominent example of this are the massive reserves of the Canadian tar sands. They are a far less cost efficient source of oil than crude, but at 60 dollars a barrel, the tar have recently become very attractive to businesses. Recent months have seen billions of dollars invested in the oil sands.

The increased price of oil might also encourage greater fuel efficiency. Recent years have seen a move towards more fuel-thirsty sport utility vehicles in the United States and Canada, and this may be stopped by the high price of gas. The September 2005 sales data for all the vehicles vendor indicated SUV sales dropped while small cars sales increased compared with 2004 sales. There is also an ever increasing market for hybrid vehicles since they are more fuel efficient; since the 1973 energy crisis, the front-wheel drive passenger car has replaced rear-wheel drive as the preferred layout for energy efficient cars. There is an increasing demand of crossover sport utilities which are more fuel efficient - especially for those based on passenger car platforms.

USA Stock markets

Three-year performance of the oil industry... ...and one-month performance.

The increase in oil prices over two years was mirrored by an increase in stock values in the energy sector. The value of the stock in companies such as Apache[23] and Conoco-Phillips [24] rose sharply during this period. These prices increased more rapidly toward the end of August, particularly after Hurricane Katrina. [25]

Wal-Mart shares continued their decrease in value that began with the increase in the oil prices. Over two years, stock in Wal-Mart dropped in value by 25% from $60 per share to under $45 per share. [26] Earlier in August, Wal-Mart announced that higher than expected oil prices cut into the corporation's profits for the 2nd quarter of 2005. Since oil prices after the end of the 2nd quarter continued to rise, 3rd quarter profits from Wal-Mart are expected to be small. Because Wal-Mart's distribution system relies on the customer to drive to a large discount big-box store, increases in the price of fuel might discourage some customers from making the trip as often. Wal-Mart, like all retailers, will also face higher shipping costs to get goods from the factory to the stores. This will likely cause inflationary pressures.

Asia Pacific Region (excludes Australasia)

The Pacific rim had been experiencing this crisis on an ongoing basis prior to Hurricane Katrina.

  • In the Philippines, the oil crisis caused its public to call for immediate government assistance. [27] New sources of energy were sought to deal with the crisis.[28]
  • A senior minister of Singapore expressed concern at the oil crisis in Indonesia.[29]
  • The Indonesian president had instituted subsidies to control the price of gasoline.[30]


Sub-Saharan Africa

High oil prices are hurting many countries in Africa, including Zimbabwe, Eritrea and Tanzania. High oil prices have created an oil supply instability, per barrel price instability or both. In some cases this has led to fuel rationing being enacted.

  • Many countries in Sub-Saharan Africa lack the foreign exchange reserves (ie, Dollars) to purchase enough oil products at the ever increasingly higher prices. These nations must resort to limiting imports or rationing their existing supplies.

Latin America & Caribbean

Venezuela's president, Hugo Chávez, came under increasing scrutiny as he began selling oil at lower-than-market prices to island nations in the Caribbean. [31]

  • At the same time, Cuba has experienced electricity shortages.

Gulf States & Eurasian Arab-Islamic Regions

Iran came under increasing pressure from the European Union in regard to their program to build nuclear power plants.[32]


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Iran came under increasing pressure from the European Union in regard to their program to build nuclear power plants.[32]. Because of its controversy, many newspaper publishers either relegate the strip to the op-ed section of the paper, pull more potentially controversial strips from being published, or do not publish the strip at all, tactics also similar to Doonesbury.
. [31]. Some attribute the disputes over the strip to a political correctness that discourages any discussion or recognition of racial distinctions. Venezuela's president, Hugo Chávez, came under increasing scrutiny as he began selling oil at lower-than-market prices to island nations in the Caribbean. In particular, the principal characters often discuss racial and American socio-economic class issues. In some cases this has led to fuel rationing being enacted. In this aspect, it is similar to Doonesbury.

High oil prices have created an oil supply instability, per barrel price instability or both. The comic strip has been withheld by newspapers several times. High oil prices are hurting many countries in Africa, including Zimbabwe, Eritrea and Tanzania. The Boondocks is very political and occasionally subject to great controversy, usually sparked by the comments and behavior of its main character, Huey.
. Their young daughter Jazmine is very insecure about her racial identity and is often the subject of Huey's antipathy for being, in his opinion, out of touch with her African ancestry. The Pacific rim had been experiencing this crisis on an ongoing basis prior to Hurricane Katrina. The Freemans' neighbors are NAACP member Thomas Dubois (a reference both to WEB DuBois and Uncle Tom) and his White wife Sara, who are both lawyers.

This will likely cause inflationary pressures. He is also a budding comedian, although most of his humor consists of trying to play the dozens on Huey, which always falls flat. Wal-Mart, like all retailers, will also face higher shipping costs to get goods from the factory to the stores. Huey's best friend is Michael Caesar, a dreadlocked aspiring MC who agrees with many of Huey's criticisms but serves as a positive counterpoint to Huey's typically pessimistic attitude by taking a humorous approach to issues. Because Wal-Mart's distribution system relies on the customer to drive to a large discount big-box store, increases in the price of fuel might discourage some customers from making the trip as often. Their grandfather is a firm disciplinarian who is offended by their values and ideas. Since oil prices after the end of the 2nd quarter continued to rise, 3rd quarter profits from Wal-Mart are expected to be small. Riley, on the other hand, is enamored of gangsta rap culture and the "thug"/bling-bling lifestyle.

[26] Earlier in August, Wal-Mart announced that higher than expected oil prices cut into the corporation's profits for the 2nd quarter of 2005. Newton) and is harshly critical of many aspects of modern Black culture. Over two years, stock in Wal-Mart dropped in value by 25% from $60 per share to under $45 per share. Huey is a devotee of black radical ideas of the past few decades (as explained in the May 4, 1999 strip, Huey is in fact named after Black Panther Huey P. Wal-Mart shares continued their decrease in value that began with the increase in the oil prices. The strip depicts Huey Freeman and his younger brother Riley, two black children who have been moved out of Chicago by their grandfather to live with him in the predominantly white suburb of Woodcrest (most likely in Maryland, as seen from the area code stated in the March 16, 2000 strip). [25]. The Boondocks animated series premiered on Cartoon Network's Adult Swim on November 6, 2005.

These prices increased more rapidly toward the end of August, particularly after Hurricane Katrina. McGruder has sold the television and film rights for The Boondocks to Sony Pictures Entertainment. The value of the stock in companies such as Apache[23] and Conoco-Phillips [24] rose sharply during this period. I think I'm a better writer than artist." [1] Seng has since left and Carl Jones has illustrated the strip since late 2004. The increase in oil prices over two years was mirrored by an increase in stock values in the energy sector. In an interview with The New Yorker, McGruder said, "If something had to give, it was going to be the art. There is an increasing demand of crossover sport utilities which are more fuel efficient - especially for those based on passenger car platforms. In the fall of 2003, McGruder passed art duties on to Boston-based artist Jennifer Seng.

There is also an ever increasing market for hybrid vehicles since they are more fuel efficient; since the 1973 energy crisis, the front-wheel drive passenger car has replaced rear-wheel drive as the preferred layout for energy efficient cars. Blair's help to the budding strip went unnoticed during the allegations against the latter of article fabrication, as McGruder joined others in lampooning Blair. The September 2005 sales data for all the vehicles vendor indicated SUV sales dropped while small cars sales increased compared with 2004 sales. The strip got its start as a result of The Diamondback's editor Jayson Blair (of New York Times source falsification infamy), who decided to pay McGruder $30 per strip, $17 more than the others at the time. Recent years have seen a move towards more fuel-thirsty sport utility vehicles in the United States and Canada, and this may be stopped by the high price of gas. . The increased price of oil might also encourage greater fuel efficiency. In the fall of 2005, The Boondocks was adapted into an animated television series of the same name for Cartoon Network's Adult Swim programming block.

Recent months have seen billions of dollars invested in the oil sands. A popular and highly controversial strip, The Boondocks deals with various issues involving African-American culture and American politics, as seen through the eyes of its main protagonist, a ten-year-old Black radical named Huey Freeman. They are a far less cost efficient source of oil than crude, but at 60 dollars a barrel, the tar have recently become very attractive to businesses. As it gained popularity, and a loyal following the comic strip was picked up by the Universal Press Syndicate in 1999 and made its national debut on April 19 of that year. The most prominent example of this are the massive reserves of the Canadian tar sands. Created by McGruder in 1997 for The Diamondback, the student newspaper at the University of Maryland, College Park, the strip moved from the college pages and was printed in the monthly hip-hop magazine, The Source, in 1997. The increased price of oil also makes previously impractical sources of oil attractive to businesses. The Boondocks is a daily comic strip written and originally drawn by Aaron McGruder.

Outside the US, more than 50% of oil is consumed for stationary, non-transportation purposes such as electricity production where it is relatively easy to substitute natural gas for oil. 2005: Public Enemy #2. Nigeria is working on burning natural gas to produce electricity instead of simply flaring the gas. 2002: A Right to Be Hostile (treasury). For example, China and India are currently heavily investing in natural gas facilities. 2001: Fresh for '01...You Suckas!. Economists say that the substitution effect will spur demand for alternate energy sources, such as coal or liquified natural gas. 2000: Because I Know You Don't Read the Newspaper.

As a result during this period the Federal Reserve has rapidly been increasing interest rates to curb inflation. Has struggled trying to debate with Huey during class. This was driven by a 4.2% increase in energy costs. Old-fashioned and not used to dealing with Blacks, he is intimidated by Huey's intellect. In the United States, the Consumer Price Index rose by 0.6% compared to 0.2% for September. Petto - Huey and Caesar's teacher, who is as clueless about how to handle them as the principal is. Inflation has increased. Mr.

Despite the rapid increase in the price of oil, neither the stock markets nor the growth of the global economy have been noticeably affected. Somehow has access to FBI files of Huey. But oil's historically high ratio of Energy Returned on Energy Invested continues a significant decline. The school principal - an out of touch young man who prepared for the arrival of Huey and Riley by mistakenly renting several blaxploitation films thinking of them as representative of black culture. In the United States, for instance, each $1000 dollars in GDP required 2.4 barrels of oil in 1973 when adjusted for inflation this number had fallen to 1.15 by 2001. Later, he ran into Lucas himself and decided to kick him in the rear, sparking a brief wave of publicity for both himself and Huey, who claimed responsibility for the attack. While total consumption has increased [22], the western economies are less reliant on oil than they were twenty-five years ago, due to substantial growths in productivity. Finding the movie disappointing, he thought he had nothing left to live for, until Huey convinced him to sue George Lucas, though Huey didn't actually mean for him to do so.

This could well be the case if a major storm were to hit the gulf, where the reserve is located. Huey regularly visited him in line. demand for about a month in the event of an emergency, unless it is also destroyed in the emergency. Psycho Star Wars Guy - a long-haired young man who stood in line for The Phantom Menace for months. The American Strategic Petroleum Reserve could on its own supply current U.S. Hiro only appeared in the original Diamondback version of the strip. Nevertheless, that loss of revenue would put a strain on government balance sheets. One of Huey's friends; a young Asian-American DJ.

Most economists see this as unlikely, partly because all developed countries have high fuel taxes that decrease as oil prices increase and can be eliminated in the event of a dramatic price spike. Hiro Otomo. Some see these increases in the price of oil leading to a recession comparable to those that followed the 1973 and 1979 energy crises or a potentially worse situation such as a global oil crash. Uncle Ruckus - a mentally disturbed neighborhood handyman and acquaintance of the Freemans who plays the archetypal role of a Black man who dislikes his own race and constantly, but often illogically, praises Caucasians. There is controversy regarding the potential effects of oil-price shocks. She shows a fondness and curiosity for rap music (Snoop Dogg in particular). the implications for the oil market are global."[21]. Cindy McPhearson - a Caucasian girl in Huey's class who appears to be utterly clueless about racial issues and is a general airhead.

[19] [20] The press release from the IEA states, ".. Jazmine is often portrayed as naive, and is very optimistic in contrast to Huey's pessimism. These supplies would begin entering the US markets within two weeks of 2 September. Jazmine Dubois - Thomas and Sarah's biracial daughter who seems to like Huey, despite the fact that he is occasionally cold towards her. In order to stabilize world energy supplies, the International Energy Agency offered to sell two million barrels of crude oil and other refined products from national supplies. Tom is often seen talking with Huey about present events in politics. Bush stated, "This storm has disrupted the ability to make gasoline and deliver gasoline," and "This is going to be a difficult road."[18] Many people have observed however that stores of crude oil do little to address inadequate refinery and distribution capacity. They both work as lawyers.

EDT, on 31 August, President Bush announced the Energy Department was approving loans from the Strategic Petroleum Reserve and that EPA announced nationwide waver on fuel blends. Thomas and Sarah Dubois - an interracial couple in the neighborhood. On 5:10 p.m. He is often shown to be an "old school" disciplinarian when dealing with the kids. Airports began to report shortages in aviation fuel on 2 September.[15] A shortage could lead to a decrease in food production.[16] Higher prices for heating oil and natural gas were expected as the winter heating season set in.[17]. Robert is known to overpanic and for occasionally being selfish and valuing his own peace and comfort over the needs of others, but does look out for the children's welfare. [14] Many of these were blamed on panic buying. Robert Freeman - Huey and Riley's retired "Granddad".

Shortages were feared or experienced in several states including Tennessee [12], Alabama [13], and South Carolina. Unlike Huey, Caesar is more optimistic and cheerful, and is usually making jokes about whatever issue is at hand. In Stockbridge, Georgia, regular gas prices came to $5.87 at a BP station. Michael Caesar - Huey's classmate and best friend, and agrees with most of Huey's views of life. Gas prices soared after the closing down of the major pipelines connecting the gas of the Louisiana region to the entire East Coast. Riley Freeman - The opposite of his older brother, eight-year-old Riley praises the "thug life", and aspires to be the same as all the rappers and thugs he sees on television. [11]. He can be seen as a less upbeat Michael Evans.

Louisiana Offshore Oil Port has not. Newton, co-founder of the Black Panthers. Port Fourchon has also suffered long term damage. In the early days of the strip, he is mentioned to be named after Huey P. The port of Louisiana is one of its most important inlet for oil imports, and the gulf itself is a major oil producer. He is clearly disturbed by the ignorance in modern-day black television and issues in politics. The Gulf Coast is home to a major portion of America's refining capacity. Huey Freeman - a ten-year-old boy who appears angry most of the time and sees himself as a revolutionary.

Hurricane Katrina had a major impact on oil and gas prices, especially within the United States. Continued concerns about Iran raised the price to $68.38 on January 31.[10]. Observers believe that violence in Nigeria, and Iran's friction with the West are responsible for this price increase. This was the highest increase since early October 2005.

On January 17, sweet crude oil for February delivery rose by $2.38 (3.7%) to $66.30 a barrel. As a result, shortage of a particular grade of oil can keep street prices high, even when overall supply exceeds demand. In addition, there are different grades of oil and each refinery is typically configured to process a narrow range of grades. While the street price of gasoline usually corresponds to the price of crude oil, refinery capacity can become the governing factor, particularly during periods of high demand.

Over the course of three weeks leading up to August 10, crude oil prices had risen by 13%. During mid-August, with a string of refinery snags (fires/other deterrents to oil refining), shrinking gasoline inventories, and a growing thirst for oil by American consumers, New York Mercantile Exchange traded crude oil futures surged past the $66 mark and briefly touched $67/barrel. influence. Saudi Arabian King Fahd's death on August 1, 2005, meant a new regime that may be less amicable to U.S.

In June 2005 crude oil prices surged to record highs eventually breaking the psychological barrier of $60. It then reversed course and headed to an all time high of $58.28, driven mainly by lingering concerns of a prolonged weak dollar. In April 2005 the price began to fall, reaching $53.32 on April 9. On March 16, 2005, the price surpassed the October 2004 high of $55.17 to close at $56.46.

The price of light, sweet crude oil on NYMEX has been above $50/barrel since March 5, 2005. After retreating for several months during the winter of 2004/2005, prices rose to new highs in March 2005. These analysts believe the problem would be solved by increasing the efficiency of factories, homes and transportation and easing the demand crunch by using less energy and more renewable energy. Still others suggest that the main issue is a lack of energy efficiency in industry.

A July 14, 2005 Morgan Stanley report[9] suggests that opinions of the oil market could burst just like a bubble if indications of declining Asian demand continue. If these speculators are wrong, current prices may actually be a price bubble, and the price could thus collapse. These people argue that speculators foresee increasing demand, decreasing supply, or both, leading to a long term increase in the price of oil. Others believe that the price of oil is almost entirely speculative, and that the increase in price is due to oil speculation extending into the long term.

Not only is there a limited amount of fossil fuels which have been burnt as fuel, but however much remains will be used faster by a growing industrialized world population and what remains will be more dificult to get since the easiest wells have been tapped and the remaining sources will be fought over in resource wars. A more fundamental problem that some believe is causing the price to rise is the probability of peak oil already or soon to be reached. Critics argue that these problems periodically push price higher, but that they are not fundamental or long term enough to cause the large jump in gas price. Some people and news agencies argue that labor strikes, hurricane threats to oil platforms, fires and terrorist threats at refineries, and other general problems are responsible for the higher gas prices.

Since oil is traded in dollars, the price must increase for OPEC to maintain buying power in Europe. One other important cause is the United States dollar's slump against the Euro. The short term price of oil is partially controlled by the OPEC cartel and the oligopoly of major oil companies. Even if oil supplies themselves are not reduced, some experts feel the easily accessible sources of light sweet crude are almost exhausted and in the future the world will depend on more expensive sources of oil.

Despite this there is increasing discussion of peak oil and the possibility that the future may see a reduced supply of oil. This rate of increase is faster than that of any other date in the past. World supply (specification) came in at 83 million barrels a day during 2004 in department of energy EIA calculations ([8]). Gas prices in the region, normally 70 cents below the national average, were at $3.12 on August 30.[7].

Short-term shutdowns because of power outages knocked out two major on-shore pipelines, and at least 10% of the nation's refining capacity was not operating in the wake of the storm. market. In late August, 2005, Hurricane Katrina crippled the supply-flow from off-shore rigs in the Gulf Coast, the largest source of oil for the domestic U.S. Outside the Middle East other oil producers have worried investors such as the strikes political problems in Venezuela and potential instability in West Africa.

The war in Iraq, Iran's nuclear program, and questions about Saudi Arabia's internal stability all could in the future lead to a dramatic fall in the supply of oil. One of the most important is growing turbulence in the Middle East, the world's largest oil producing region.
There are a number of reasons why oil traders feel that oil supplies might be reduced. Note: the total percentage exceeds 100 because the overall demand from all other countries decreased during the same period..

Department of Energy Energy Information Administration estimates: [6]. Sources of the world-consumption-increase in 2004 compared to 2003 (total increase of 3.4%), according to U.S. New demand is also coming from emerging industry in third world nations, including India and especially China which is developing a western-style car culture and whose manufacturing bases have grown very rapidly in recent years. economy currently accounts for one-quarter of all demand.

The U.S. market, the source of an increasing percentage of the world's demand for petroleum. High demand is led by the U.S. .

The previous high was $2.38 per gallon in March 1981, which would be $3.03 per gallon after adjusted for inflation.[4][5]. The average retail price was nearly $3.04 per gallon. In the United States gasoline prices reached an all time high during the first week of September 2005 in the aftermath of Hurricane Katrina. A record price of $70.85 per barrel was reached on August 29, 2005.[2] While oil prices are considerably higher than a year ago, they are still roughly 25$ from exceeding the inflation-adjusted "peak of the 1980 shock, when prices were over $90 a barrel in today’s prices" [3].

By August 11, 2005, the price had been above $60/barrel for over a week and a half. The price of standard crude oil on NYMEX was under $25/barrel in September 2003. At the same time, Cuba has experienced electricity shortages. These nations must resort to limiting imports or rationing their existing supplies.

Many countries in Sub-Saharan Africa lack the foreign exchange reserves (ie, Dollars) to purchase enough oil products at the ever increasingly higher prices. The Indonesian president had instituted subsidies to control the price of gasoline.[30]. A senior minister of Singapore expressed concern at the oil crisis in Indonesia.[29]. [27] New sources of energy were sought to deal with the crisis.[28].

In the Philippines, the oil crisis caused its public to call for immediate government assistance. combined other non-OECD: 21%. UK: 3.5%. Canada: 4%.

Asia outside Japan and China: 13.8%. US: 19.4%. China: 38.9%.

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