The high price of oil

The surging price of oil appears to be at the root of all our economic woes, but there may be darker days ahead. In recent months, world oil prices have broken the $100 per barrel barrier for crude oil; it was only spring last year that the price of crude was around the $50 a barrel mark. Goldman Sachs recently said: "$200 a barrel could be a reality in the not-too-distant future in the case of a 'major disruption'." The reality of $200 a barrel by the end of the year is seen by some experts as unlikely, in part because OPEC (Organisation of Exporting Petroleum Countries) has been steadily increasing its production since December 2007. In fact, Western markets' inventories are steadily growing, and are expected to easily accommodate growth in consumption of 1.6 per cent. Chakib Kheli, OPEC's President, recently predicted that petroleum prices will range between $80 and $110 for the rest of 2008. Some analysts have suggested that the oil markets should should not be experiencing the high oil prices of recent months, especially with the expected downturn in the world economy, increasing spare capacity and the slow down in demand for oil. Demand is slowing and the USA petrol consumption in January 2008 was 4 per cent down on January 2007, reports the US Department of Energy (USDOE). In China, growth in oil imports is easing, reports the International Energy Agency (IEA), from 10 per cent a year to 6 per cent. In addition, world surplus oil production capacity has risen from 1.5 million barrels a day a few years ago, to over three million barrels today.