From the mid-1980s to September 2003, the inflation adjusted price of a barrel of crude oil on NYMEX was generally under $25/barrel. Then, during 2004, the price rose above $40, and then $50. A series of events led the price to exceed $60 by August 11, 2005, and then briefly exceed $75 in the middle of 2006. Prices then dropped back to $60/barrel by the early part of 2007 before rising steeply again to $92/barrel by October 2007, and $99.29/barrel for December futures in New York on November 21, 2007.[1] Throughout the first half of 2008, oil regularly reached record high prices. On February 29, 2008, oil prices peaked at $103.05 per barrel,[2] and reached $110.20 on March 12, 2008,[3] the sixth record in seven trading days.[4][5] Prices on June 27, 2008, touched $141.71/barrel, for August delivery in the New York Mercantile Exchange (after the recent $140.56/barrel), amid Libya's threat to cut output, and OPEC's president predicted prices may reach $170 by the Northern summer.[6][7] The most recent price per barrel maximum of $147.02 was reached on July 11, 2008.[8] After falling below $100 in the late summer of 2008, prices rose again in late September. On September 22, oil rose over $25 to $130 before settling again to $120.92, marking a record one-day gain of $16.37. Electronic crude oil trading was temporarily halted by NYMEX when the daily price rise limit of $10 was reached, but the limit was reset seconds later and trading resumed.[9] By October 16, prices had fallen again to below $70, and on November 6 oil closed below $60.[10]
As the price of producing petroleum did not rise significantly, the price increases have coincided with a period of record profits for the oil industry. Between 2004 and 2007, the profits of the six supermajors - ExxonMobil, Total, Shell, BP, Chevron, and ConocoPhillips - totaled $494.8 billion.[11]
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United States crude oil prices averaged $31 a barrel in 2003 due to political instability within various oil producing nations. It rose 19% from the average in 2002.[12] The 2003 invasion of Iraq marked a significant event for oil markets because Iraq contains a large amount of global oil reserves.[13] The conflict coincided with an increase in global demand for petroleum, but it also reduced Iraq's current oil production and has been blamed for increasing oil prices.[14] However, oil company CEO Matthew Simmons emphasizes the peaking and decline of oil-exporting in Mexico, Indonesia and the United Kingdom is the reason for the price gouging. According to Simmons,[15] isolated events, such as the Iraq war, affect short-term prices but do not determine a long-term trend. Simmons cites the use of enhanced oil recovery techniques in large fields such as Mexico's Cantarell,[15] which maintained production for a few years until it eventually declined. Pumping oil out of Iraq may reduce petroleum prices in the short term, but will be unable to perpetually lower the price. From Simmons' point of view, the invasion of Iraq is associated with the start of long-term increase in oil prices, but it may mitigate the decline in oil production by retaining a partial amount of Iraq's oil reserves. As a direct consequence, the oil production capacity was diminished to 2 million barrels (320,000 m3) per day.[16]
After retreating for several months in late 2004 and early 2005, crude oil prices rose to new highs in March 2005. The price on NYMEX has been above the $50 per barrel since March 5, 2005. In June 2005, crude oil prices broke the psychological barrier of $60 per barrel. After the destruction of Hurricane Katrina in the United States, gasoline prices reached a record high during the first week of September 2005. The average retail price was, on average, $3.04 per U.S. gallon.[17] The average retail price of a liter of petrol in the United Kingdom was 86.4p on October 19, 2006, or $6.13 per gallon.[18] Oil production in Iraq continued to decline as result of the nation's ongoing conflict causing a decrease in production to 1 million barrels per day (160,000 m3/d).[19]
In mid 2006, crude oil was traded for over USD 79 per barrel (bbl),[20] setting an all-time record. The run-up is attributed to a 1.9 increase in gasoline consumption, geopolitical tensions resulting from North Korea's missile launch. The ongoing Iraq war, as well as Israel and Lebanon going to war are also causative factors. The higher price of oil substantially cut growth of world oil demand in 2006, including a reduction in oil demand of the OECD.[21] After news of North Korea's successful nuclear test on October 9, 2006, oil prices rose past $60 a barrel, but fell back the next day.
On October 19, 2007, U.S. light crude rose to $90.02 per barrel due to a combination of ongoing tensions in eastern Turkey and the reducing strength of the U.S. dollar.[22] Prices fell briefly on the expectation of increased U.S. crude oil stocks, however they quickly rose to a peak of $92.22 on October 26, 2007.[23]
On January 2, 2008, U.S. light crude surpassed $100 per barrel before falling to $99.69 due to tensions on New Years Day in Nigeria, and on suspicion that U.S. crude stocks will have dropped for the seventh consecutive week. A BBC report from the following day stated a single trader bid up the price; Stephen Schork, a former floor trader on the New York Mercantile Exchange and the editor of an oil market newsletter, said one floor trader bought 1,000 barrels (160 m3), the smallest amount permitted, and immediately sold it for $99.40 at a $600 loss.[24] Oil fell back later in the week to $97.91 at the close of trading on Friday, January 4, in part due to a weak jobs report that showed unemployment had risen.[25]
On March 5, 2008, OPEC accused the United States of economic "mismanagement" that was pushing oil prices to record highs, rebuffing calls to boost output and laying blame at the George W. Bush administration.[26] Oil prices surged above $110 to a new inflation-adjusted record on March 12, 2008 before settling at $109.92.[27] On April 18, 2008 the price of oil broke $117 per barrel after a Nigerian militant group claimed an attack on an oil pipeline.[28] Oil prices rose to a new high of $119.90 a barrel on April 22, 2008,[29] before dipping and then rising $3 on April 25, 2008 to $119.10 on the New York Mercantile Exchange after a news report that a ship contracted by the U.S. Military Sealift Command fired at an Iranian boat.[30]
On June 6, prices rose $11 in 24 hours, the largest gain in history due to the possibility of an Israeli attack on Iran.[31] The combination of two major oil suppliers reducing supply generated fears of a repeat of the 1973 oil crisis. The mid-July decision of Saudi Arabia to increase oil output caused little significant influence on prices. According to the oil minister of the Islamic Republic of Iran, Gholam-Hossein Nozari, the world markets were saturated[32] and a Saudi promise of increased production would not lower prices.[33] Several Asian refineries were refusing Saudi petroleum in late June because they were over priced grade.[34]
On July 3, "the Brent North Sea crude contract for August delivery rose to $US145.01 a barrel" in Asian trade.[35] London Brent crude reached a record of $145.75 a barrel, and Brent crude for August delivery peaked to a record $145.11 a barrel on London's ICE Futures Europe exchange, and to $144.44 a barrel on the NYMExchange.[36][37] By midday in Europe, crude rose to $145.85 a barrel on the NYME while Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange.[38][39]
On July 15, 2008, a sell-off began after remarks by Chairman of the Federal Reserve, Ben Bernanke, indicated significant demand destruction within the US because of high prices. Bernanke's statement precipitated an $8 drop, the biggest since the first US-Iraq war.[40][41] By the end of the week, crude oil fell 11% to $128, also affected by easing of tensions between the US and Iran.[42] By August 13, prices had fallen to $113 a barrel.[43] By the middle of September, oil price fell below $100 for the first time in over six months,[44] falling below $92 in the aftermath of the Lehman Brothers bankruptcy.[45]
A stronger US dollar and a likely decline in European demand were suggested to be among the causes of the decline.[46] By October 24, the price of crude dropped to $64.15,[47] and closed at $60.77 on November 6.[10]
In January 2009, oil prices rose temporarily because of tensions in the Gaza Strip.[48] From mid January to February 13, oil fell to near $35 a barrel.[49]
On May 21, 2010, the price of oil had dropped in two weeks from $88 to $70 mainly due to concerns over how European countries would reduce budget deficits; if the European economy slowed down, this would mean less demand for crude oil. Also, if the European economic crisis caused the American economy to have problems, demand for oil would be reduced further.[50] Other factors included the strong dollar and high inventories. According to the U.S. Energy Information Administration, gas prices nationwide averaged $2.91 on May 10, dropping to $2.79 two weeks later. The Deepwater Horizon oil spill was not a factor in gas prices since the well had not produced.[51]
Prices rose back to $90/barrel in December 2010.[52] The national average for a gallon of 87 octane regular unleaded averaged $3.00/gallon on December 23, sparking fear of a second recession if prices reached $100/barrel and $4.00/gallon gasoline, as forecasted for spring 2011. The price increases in December were based on global demand and the Arctic blasts affecting North America and Europe.
Political turmoil in Egypt, Libya, Yemen, and Bahrain drove oil prices to $95/barrel in late February 2011. A few days prior, oil prices on the NYMEX closed at $86. Oil prices topped at $103 on February 24 where oil production is curtailed to the political upheaval in Libya.[53]
Oil supplies remained high, and Saudi Arabia assured an increase in production to counteract shutdowns. Still, the Mideast and North African crisis led to a rise in oil prices to the highest level in two years, with gasoline prices following. Though most Libyan oil went to Europe, all oil prices reacted. The average price of gasoline in the United States increased 6 cents to $3.17.[54] On March 1, 2011, a significant drop in Libyan production and fears of more instability in other countries pushed the price of oil over $100 a barrel in New York trading, while the average price of gas reached $3.37. Despite Saudi promises, the sour type oil the country exported could not replace the more desirable sweet Libyan oil.[55] On March 7, 2011, the average price of gas having reached $3.57, individuals were making changes in their driving.[56]
The weakened U.S. Dollar resulted in a spike to $112/barrel with the national average of $3.74/gallon - with expectations of damaging the U.S. economy suggestive of a long-term recession.[57] As of April 26, the national average was $3.87 - with a fear of $4/gallon as the nationwide average prior to the summer driving season.[58]
The national average rose on May 5, 2011 for the 44th straight day, reaching $3.98. However, that same day, West Texas Intermediate crude fell below $100 a barrel, the lowest since March 16.[59] This came after crude oil for June delivery reached $114.83 on May 2, the highest since September 2008, before closing at $97.18 on May 6, a day after dropping 9 percent, the most dramatic single-day drop in over two years. Gas prices fell slightly on May 6, and experts predicted $3.50 a gallon by summer.[60][61][62]
In mid-June, West Texas Intermediate crude for July delivery fell nearly $2 to $93.01, the lowest price since February. The dollar was up and the euro and other currencies down, and the European economic crisis made investors concerned. London Brent crude fell 81 cents to $113.21. On June 15 the Energy Information Association said oil consumption was down 3.5 percent from a year earlier, but wholesale gasoline demand was up for the first time in several weeks. The price of gas on June 17 was $3.67.5 a gallon, 25.1 cents lower than a month earlier but 96.8 cents above a year earlier.[63] On June 24, the price of gas was $3.62.8 and expected to go much lower due to the opening of the Strategic Petroleum Reserve. U.S. oil prices fell below $90 before rising again, and Brent crude fell two percent.[64] However, on June 29, West Texas intermediate crude had risen to $94.96, almost $5 above the lowest point reached after the previous week's action. One reason was the falling dollar, as Greece appeared less likely to default on its debt; concern over the Greek debt crisis had caused falling oil prices.[65][66] After another week, oil for August delivery had risen from $90.61 to $98.67 and gas prices were up five cents. Increased worldwide demand was one reason.[67] Brent Crude remained high at $118.38 partly due to supply problems in Europe, including lower North Sea production and the continuing war in Libya.[68]
On August 4, the price of oil dropped 6 percent to its lowest level in 6 months. On August 5, the price had dropped $8.82 in a week to $86.88 per barrel on the New York Mercantile Exchange. The same pessimistic economic news that caused stock prices to fall also decreased expected energy demand, and experts predicted a gas price drop of 35 cents per gallon from the average of $3.70.[69] On August 8, oil fell over 6 percent, in its largest drop since May, to $81, its lowest price of the year.[70] On September 24, oil reached $79.85, down 9 percent for the week, due to concerns about another recession and the overall world economy. The average price of gas was $3.51, with predictions of $3.25 by November, but it was below $3 in some markets.[71]
During October, the price of oil rose 22 percent, the fastest pace since February, as worries over the U.S. economy decreased, leading to predictions of $4 by early 2012. As of November 8, the price reached $96.80. Gas prices were not following the increase, due to lower demand resulting from the economy, the normal decrease in travel, lower oil prices in other countries, and production of winter blends which cost less. The average rose slightly to $3.41 but predictions of $3.25 have been made.[72]