The price of light, sweet crude oil on NYMEX has been above $40/barrel since late July 2004. By October the price of crude oil had temporarily surpassed $55/barrel. In the United States of America, 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.

The apparent cause is high demand and low supply of crude oil. High demand is coming from increased industry in emerging third world nations including India and especially China which is developing a large car culture.

News articles have explained the low supply in the following ways: the war in Iraq, hurricane Ivan's damage to offshore oil platforms in the Caribbean, YUKOS in Russia, OPEC's (most notably Saudi Arabia's) failure to bring prices down via dipping into spare capacity, civil unrest in oil producing West Africa especially Nigeria, worker's strikes and mechanical problems with oil production in Norway. It is an ever-growing list of explanations with new ones being added every month.

Some observers say that discovery rates for new sources of oil are not keeping up with production rates meaning we are burning up old oil discoveries without replacing them thereby creating future shortages.

While some see these increases in the price of oil leading to a recession comparable to those that followed the 1973 and 1979 energy crises most economist see this as unlikely. 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. The American Strategic Petroleum Reserve could serve a similar role in overcoming price increases in an emergency. Moreover the western economies are about half as reliant on oil as they were thirty years ago. In the United States, for instance, each $1000 dollars in GDP required 1.43 barrels of oil in 1970. In 2000 this number had fallen to 0.74.

Weakening of the US dollar also contributed to higher oil prices since oil is traded in US dollars - the rest of the world can buy at higher prices.

See also

• energy crisis
• 1973 energy crisis
• 1979 energy crisis
• 1990 spike in the price of oil
• List of recessions
• Hubbert curve and Hubbert peak

External links

• Oil Prices and the Iraq War: Market Interpretations of Military Developments by US Navy CCC (http://www.ccc.nps.navy.mil/rsepResources/si/apr03/middleEast.asp)
• The Association for the Study of Peak Oil and Gas Newsletters (http://www.asponews.org/)
• graph of staggering oil price increase (http://www.futuresource.com/charts/charts.jsp?s=CL1%21&o=&a=M&z=800x550&d=LOW&b=CANDLE&st=)
• graph of oil prices in relation to other fossil fuel prices (http://oilnergy.com/1combo.htm)
• US DOE EIA retail gasoline prices (http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html)
• US DOE EIA retail gasoline and diesel prices charts (http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp)