"Whats Driving Oil Prices?"

Essay by bnkeltner November 2006

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The article, "What is driving oil prices?", discusses the influences on different factors relating to the sky rocket in oil prices from around the world. West Texas Intermediate Oil, gave predictions on the price per barrel of oil from 1994 to 2008. In the 14 year span they hypothesized that oil would range from about $10 a barrel in 1994 to nearly $50 a barrel in 2004. This drastic change in price per barrel was slammed upon the oil industry within a two year period. All the way up to the end of 2002 the company had forecast its prices to get around $27 a barrel. It wasn't till the change in the supply and change in demand for oil in 2003 that the company and the world began to see that the company's forecast was wrong.

A driving force in the price per barrel comes from more countries relying on crude oil and products powered by it.

Other countries from around the world, such as China and India, have started buying more oil by the barrel demanding a bigger portion of the resources. China in 2003 took second, the first being the United States, in consumption of petroleum products. All of the expansions and developments should look like a good thing, especially in economics. Growth and technology can lead to better use of resources, however the supply of oil has slowly been diminishing. Since the United States has gone to war with Iraq, an enormous supplier of oil, many of their refineries have been attacked and ambushed. This has immensely slowed the production process making it hard for them to keep pace with the demand of oil from countries. Venezuela, another big manufacturer of oil, is finally getting back to pace after a huge strike took place...