by D. Cupples | Yesterday, oil prices briefly hit $100 a barrel for the first time. Economists worry about inflation, and some foresee a recession in the not-too-distant future. The New York Times reports:
"There is no shortage of explanations for the escalation of oil prices by about 60 percent over the last year. The price of a barrel was below $25 as recently as 2003 and, almost unimaginably, below $11 in 1998, a time when there was a glut in the world oil markets"
"Booming economies in recent years have led to more consumption of oil-derived products like gasoline, jet fuel and diesel. Political tensions in countries like Nigeria, Venezuela and Iran have threatened world supplies, while important fields in Mexico, the United States and other countries are aging and producing less.
"Big oil companies, though flush with cash from record profits, are having trouble finding promising new fields to increase supplies. Newly found fields in the deep waters of the Gulf of Mexico and off the coast of Brazil will take years to develop.
"The Bush administration has further tightened supplies by announcing that it would add to the nation’s Strategic Petroleum Reserve in the coming weeks, a move that some leading Democrats have urged President Bush to call off to ease the tight oil market." (NY Times)
Being a non-expert on this topic, I don't know which explanation is correct. It seems that even market experts don't agree. What's clear is that we consumers are paying noticeably higher gas prices than we used to, while oil companies reap their "record profits."
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