Reasons For Current Heating Oil Prices

Oil price in the international market has been rising these past years. If who is to blame, then probably one of the reasons could be the United States, the world's largest oil consumer that has never stopped increasing its strategic oil reserves. It reached an all time high during the first week of September 2005 in the aftermath of Hurricane Katrina. The price of a standard crude oil on NYMEX from $ 25 per barrel in September 2003 has gone to a whopping $ 60 per barrel by August 2005. And it has consistently varies to approximately $ 78 per barrel by 2006.

The surge of current oil prices has caught global attention. The spike in oil prices were currently attributed to some major factors. These includes North Korea's missile launches, the recent crisis between Israel and Lebanon, and reports of a decline in petroleum reserves. And as we all know the Middle East is the world's largest oil producing region that is now in a growing turbulence.

A more fundamental problem causing oil price hike is that peak oil will soon be reached. Not only is there a limited amount of fossil fuel to be burnt, but the remaining approachable supply will be consumed more rapidly by a growing number of countries moving forward to industrialization. Producing remaining reserves is getting difficult and so oil prices are becoming expensive, especially in places or countries wherein oil is being imported.

Some other countries experience oil shortages because of the ongoing basis prior to the aftermath to Hurricane Katrina. Nonetheless, the increase of the price has a direct effect on the economy. With oil being a fundamental energy source, it affects daily economic activities such as transportation, power and industrial production. However, Non industrialized countries are especially affected by this oil price hike. Why? These states will carry the costs through the bargaining of their import expenses as well as through their domestic production.

Great demand but less supply. Oil price has been reaching its historical height and countries have been having trouble of its stability. And because of the current heating oil price hike, some countries are increasing their production of bio-fuels, which is an alternative, to offset the higher costs of oil.

Source by Mayoor Patel

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