Iran Opec Governor: Global oil market over supplied

TEHRAN, April 9 — Iran sees the global oil market as over supplied, despite prices that have been pushed up by upheaval in the Middle East, its Opec governor was quoted as saying in a newspaper today.

“Not only is there not a shortage of supply in the oil market but there is 1 million barrels (per day) of excess supply,” Mohammad Ali Khatibi told the Sharq daily in an interview in which he also warned that prices would continue to increase if the Libyan crisis persisted and would “explode” if there were any security problems in Saudi Arabia.. — Reuters

Petrol prices: Another 5 percent cut

The government of Malaysian does act responsibly to reduce the petrol prices by another 5 percent bringing pump prices down by 10 sen per liter as the global crude prices continuing to ease.


The pump price of RON97 petrol will now be RM1.90 a liter - down from RM2 - while both RON92 petrol and diesel will be RM1.80 effective Dec 2 midnight.

This is the sixth fuel price cut since June's 41 percent hike on the back of soaring crude costs and the last cut by 15 sen was just over two weeks ago.

In the wake of the economy devastating destruction caused by the evil oil is by far unforgettable and unforgivable, the reduction is seeks to prevent the economy of Malaysia from sliding down.

Economy is good with low oil prices but the question remains: Would the businessmen and manufacturers willingly given a price cuts?

Economy is good with low oil prices

Benchmark crude fell as low as $48.50 a barrel on the New York Mercantile Exchange, levels last seen on May 18, 2005, their lowest levels in almost four years, as the market focused on the threat of a global recession and tumbling energy demand.


Is oil the root of all evil? After all, economy is good with low energy prices until proven otherwise. The interest is international which is sustaining the sustainability of the economy.

One thing that has been made very clear is that the sentiment of consumers and investors had been hammered by an unrelenting series of bad economic data in the US due to the surge in oil prices, the world’s biggest energy consumer.

Governments, businesses and consumers have slashed energy expenditures, which has halved the price of crude since record highs in July.


US motorists, stung by record gasoline prices, job losses and falling home prices, left the roadways in droves. The Federal Highway Administration reported Wednesday that Americans drove 10.7 billion fewer miles in September 2008 than a year ago, the 11th straight monthly decline.


The oil fell below as low as $48.50 a barrel also reflects that demand will be affected not only in Western countries but in China and India, whose rapid growth was also a major force pushing prices to record highs earlier this year.


Japan, the world's second-largest economy is now joins the 15-nation euro-zone in recession, defined as two straight quarters of GDP contraction. For the first time since 2001, gross domestic product contracted at an annual pace of 0.4 % in the third quarter after a shrinking 3.7 % in the second quarter.

In the wake of the economy devastating destruction caused by the evil oil is by far unforgettable and unforgivable. Domestic and global pressures existed will lead at last to greater energy independence and automobile manufacturers to tout new, cleaner-greener technology or alternative energy.

Ironically, the car industry ought to build cars that use less gasoline and governed by rules that raise the fuel-efficiency standards on cars through existing technology-making more fuel-efficient automobiles or replace the use of oil.


The world has only two ways putting ahead, invest in the whole research and development chain through to commercialization to bring down costs for these new technologies and dependency on oil. Or still depending on the conventional technologies pay the cost of economy and political destruction.


How the world has wrongly presented space and military technologies. The priority concentration of effort put on space technology is by far unjustified and being taken advantages or abused of, instead economy.

The wind, solar and geothermal industries at last are growing by leaps and bounds around the world which serves perhaps the best source and effective alternative energy.

Philippines, for instance, generates nearly one-fourth of its electricity from geothermal energy. By 2013, the country intends to increase its installed geothermal capacity by 60 %. And China has already surpassed its recent 2010 goal for installed wind capacity.

Fuel down another 15 sen

The government of Malaysia will slash pump prices by another 15 sen from midnight spurred by falling global crude oil prices. The cut is the fourth such reduction since prices were raised last June when world crude prices jumped to US$140 a barrel.

From midnight, pump prices of petrol RON97 would be lowered by 15 sen to RM2.15 per litre. RON92 will be reduced from RM2.20 to RM2.05 per litre and diesel will also be lowered by 15 sen to RM2.05 per litre as well.

Prime Minister Datuk Seri Abdullah Ahmad Badawi said the reduction, the fourth since August, was made following the drastic drop in global fuel prices.

Oil prices slipped below $65 a barrel in Asia Friday, extending declines after data showed the U.S. economy contracted in the latest quarter, reinforcing expectations of a prolonged slump in demand.

Light, sweet crude for December delivery was down $1.44 to $64.52 a barrel in electronic trading on the New York Mercantile Exchange by midmorning in Singapore.

The contract overnight fell $1.54 to settle at $65.96. Oil prices have fallen about 55 percent since peaking above $147 a barrel in mid-July.

Oil rises to US$75 as OPEC eyes production cut

Oil prices rose to above $75 a barrel Tuesday in Asia as investors expected OPEC to try to halt a three-month slide in prices by cutting production quotas at least 1 million barrels a day.


Light sweet crude for November delivery rose 90 cents to $75.15 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract gained overnight $2.40 to settle at $74.25.

Prices closed as low as $69.85 a barrel last week, down 53 percent from a record $147.27 on July 11.

"It definitely looks like a cut is in the cards," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

"A cut of at least 1 million has been priced in. A cut much larger than 1 million could move prices higher."

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global oil supply, plans to announce an output reduction at a meeting on Oct. 24 at its headquarters in Vienna, said the group's president, Chakib Khelil.

Petrol prices reduced another 10 sen to 15 sen

Prime Minister of Malaysia Datuk Seri Abdullah Ahmad Badawi announced that effective Oct 15, the retail price of petrol RON97 will be reduced by 15 sen to RM2.30 a litre; petrol RON92 will go down 10 sen to RM2.20; and the price of diesel will be cut by 20 sen to RM2.20 per litre.


This followed a marked drop in world oil prices of late, said Prime Minister Datuk Seri Abdullah Ahmad Badawi in a statement today.



He said the government decided to expedite the reduction of petrol and diesel retail prices to enable the people to enjoy lower fuel prices immediately.

Oil prices could fall to $60 a barrel or lower

Under the global economic slowdown, experts predicted oil prices could fall to $60 a barrel, or lower with gas prices soon to follow.


As the world loses confidence in the foundations of its economic system, Deutsche Bank used yard sticks to argue that crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens. It expects GDP growth to slow by 1.5% over the next few years and scenario could get even worse.

"Indeed if one examines the banking sector crises in Japan and Sweden, economic output declined for at least two years following the crisis," Adam Sieminski, the bank's chief energy economist, wrote in a research note. If the global economy slows to less than 2% growth a year, "oil prices could spiral down, much like they escalated in 2007."


An oil analyst at Cameron Hanover, Peter Beutel sees a 2009 low of around $50 or $60 a barrel, then even lower prices in 2010.

"As night follows day, low oil prices have always followed high prices, and the decline has always been swifter than the advance," said Peter Beutel.

"I'm not going to rule out some extraordinarily low numbers, even $20 a barrel," he said, acknowledging that five months ago many respectable analysts though we'd never go below $100. "Whatever the market does, it's going to make us all look like fools."

Deutsche Bank concluded that "crude oil is the most richly priced commodity currently." Crude’s historic price average of $35 a barrel, it's currently 100% higher, higher than any other commodity. Oil prices would have to fall to about $45 a barrel to return crude to its historical average.

The bank also calculated how high oil prices have to be for OPEC countries to maintain their budgets. Iran and Venezuela, often the first to call for production cuts, need $95 per barrel. Russia needs about $70, while Saudi Arabia, OPEC's largest producer and de facto ruler, needs about $55 a barrel.

The bank estimates crude needs to cost $80 a barrel to keep new production coming online and $60 a barrel seems like a probable place for oil prices to bottom out.

Global crude oil prices fell 15 %

The oil price has fallen by 15 per cent from its record high of $US147.50 a barrel set two weeks ago to $US120.42, with no sign that its decline has ended.

Light, sweet crude for September delivery fell $US2.54 to settle at $US122.19 on the New York Mercantile Exchange. It was the lowest settlement price for a front-month contract since June 10.

Earlier, prices fell to $US120.42, also the lowest level since June 10. Oil has now fallen more than $US25 from its trading high of $US147.27, reached on July 11. It was reported that speculators are quitting their bets that oil prices will continue rising.

Analysts are reluctant to predict where the price will settle, as there have been several dips in the market before that raised false hopes that prices would ease back to double digits.

" Once we break through $US120, we could easily slide through to $100," Darin Newsom, senior analyst at DTN in Omaha, said.

Most of the world's oil is produced at a cost of less than $US60 a barrel.

Speculators have been widely blamed for the surge in prices, particularly by the OPEC cartel of oil producing nations. Others, including the International Monetary Fund and, as recently as this week, a report by the US Treasury and the Chicago Futures Trading Commission, have cast doubt on the role of speculators, suggesting markets are responding to supply and demand.

Rising global crude oil prices caused inflationary pressure on the economy and the immediate negative impact is great. Most of the goods and services instantly adjusted its domestic prices even higher than the oil price hike.

An oil hike had a cascading effect on price rise and caused the inflation figures soared which heaps further the burden on people.

Theoretically, the sharp drop in energy prices should generate lower petrol prices at the pump and goods and services in the market.

The question arises; will the sharp drop in energy prices follow by sharp fall in the general level of prices for goods and services, subsequently, increasing the purchasing power?

Oil price hike protest is unjustified and wrong

To protest against the recent fuel price hike, a large group led by PAS Youth chief Salahuddin Ayub, gathered in front of the Kampung Baru mosque after Friday prayers. They walked from the mosque at about 2pm towards the junction of Jalan Tuanku Abdul Rahman and Jalan Dang Wangi in front of the Sogo shopping complex while chanting slogans and carrying banners.

With global oil prices soaring, government was forced to slash fuel subsidies that were draining government coffers although there will be an immediate adverse effect on Abdullah's popularity. If Malaysia doesn’t increase the fuel price now, the economy will go down.

Ironically, global oil prices are being driven by external factors such as the weakening dollar and speculators -- and are thus out of the cartel's control. Oil is an inherently volatile commodity, and thus highly attractive to speculators, who profit by betting on the daily and even hourly fluctuations in price. And while there's nothing criminal about betting on price, it is a problem when the bets themselves influence the price.

Malaysia is struggling with a spiraling fuel subsidy bill that may breach more than 45 billion ringgit (US$14 billion) this year as global oil prices skyrocket. It is unjustified economically and politically in riding and exploiting on wasting public funds to keep the fuel price artificially low.

As a responsible government, there is a better use of the public funds in education, health, housing, and employment and to be channeled to increasing food security, including subsidizing imported rice, flour, bread and cooking oil. Thus, the burden of soaring international fuel prices by and large will have to be passed on to the consumers regardless of oil producing country status.

The fuel price hike is expected to send prices of food, transportation and other essentials higher across the board, piling further inflationary pressure on Malaysia. Malaysia's inflation is currently at 3%.

It is reported that the US's "imperial ambitions", "economic egotism" and “aggressive financial policies" are the root cause for the oil hike and current problems in the global economy.

The protect action targeted at the Malaysian government is thus seen as unjustified and wrong as the hike is purely due to external global oil prices soaring factor. The massage should be read clearly and should not be under any doubt at all.

OPEC not to hike oil output

The oil price could peak at $150-170 in the next three months and then retreat quickly by the end of the year, a Commerzbank analyst said on Wednesday.

Oil should come back down to under $100 in 2009 but the days of $40 or $50 a barrel are long gone, senior commodity analyst Eugen Weinberg told journalists in Frankfurt.

OPEC's president Chakib Khelil, the energy minister of Algeria on Thursday ruled out an increase in production by the oil-exporting group despite record crude prices.

OPEC oil exports, excluding Angola and Ecuador, will jump to their highest rate this year in the four weeks to June 28, an analyst who tracks future flows said on

Thursday.

Seaborne crude oil exports from 11 OPEC members, including Iraq, will rise to 24.85 million bpd, up 390,000 bpd from 24.46 million bpd to May 31, British consultancy Oil Movements said in its latest estimate.

"It's going up month on month. This is the high for the year," Roy Mason of Oil Movements said. Mason added that he revised down last week's estimate, which he said then was the highest in 2008. The boost in shipments from the Organization of the Petroleum Exporting Countries is expected to meet a seasonal rise in demand and halts a period of decline in sailings to the west.

"The upward movement of eastbound sailings has leveled off and the downward movement westbound has stopped," Mason said. The rise in OPEC exports from lows in mid-May echoes figures cited by other analysts and some producing countries.

Oil exports from Iran, OPEC's second-biggest producer, will rise by 300,000 barrels per day (bpd) to at least 2.5 million bpd this month and next, a top Iranian official said on Wednesday. Refinery maintenance had slowed Iran's oil sales during April and May to about 2.2 million bpd and much of the unsold crude was stored on vessels off Iran's shores.

Forming new rules of game in the world oil market

Oil prices have hit record highs of US$139.01 a barrel and have more than doubled in less than a year. The soaring cost of oil could help tip some of the world's economies into recession and causing growing strain to economies around the world, with some governments facing protests and other pressures from consumers and businesses.

In addressing the issue, both the Malaysian and Indian governments have recently raised fuel prices in order to cut the subsidies they provide.

India insisted there was no agreement to remove the subsidies altogether, China made clear it had no time frame for moving towards lower subsidies, and Japan confirmed they had agreed only on the need to remove the subsidies.

Crude oil, also known as petroleum, is the world's most actively traded commodity. The largest markets are in London, New York and Singapore. To an increasing extent, financial institutions are trading in oil as an investment like shares or currencies. They buy oil contracts in the hope that their value will go up before they sell them. This would commonly be in a futures contract for delivery in the following month and the minimum purchase is 1,000 barrels.

In this type of transaction, the buyer agrees to take delivery and the seller agrees to provide a fixed amount of oil at a pre-arranged price at a specified location. Futures contracts are only traded on regulated exchanges and payments are settled daily, based on their current value in the market place.

Opec still controls the amount of oil it pumps into the marketplace to keep the basket price within a predetermined range. Producers say that there is plenty of supply and blame the high prices on speculators.

Economists will tell you that prices are set by supply and demand and, indeed, at the heart of the rise in oil prices are what are known as the fundamentals.

Demand for oil has been growing as Asia's powerhouse economies such as China and India fuel their rapid economic expansion. At the same time, there are all sorts of worries about the supply of oil.

A lot of the world's oil comes from somewhat unstable countries, so every time oil workers are attacked in Nigeria or Iraqi oil facilities are damaged, people get concerned about the supply of oil.

Fundamentally, people are worried that demand may be growing faster than supply, and oil is such an important commodity that they are prepared to pay more and more for it if they are worried.

Events such as rocket testing in North Korea have been cited as reasons for the rising price of oil. But it is hard to imagine how it could have any direct effect on its supply or demand.

But recently, many traders have believed that some people are treating oil and the dollar as alternative investments. So, if they think the dollar is falling they will buy oil instead and if they think oil is falling they will buy dollars instead. Investors hedging oil against the weak dollar has also pushed up the price of oil.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July, justified the blame the high prices were caused by speculators.

Some analysts even suggested that prices would reach as high as $200 a barrel during the next 18 months. The market was also responding to a statement by Israel's transport minister that an attack on Iran was unavoidable after sanctions to prevent Tehran from developing its nuclear capability had failed.

The fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters.

Friday's spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

Separately, Russian President Dmitry Medvedev blamed what he termed the US's "economic egotism" for the current problems in the global economy.

He accused the US of "aggressive financial policies" and said most people in the world had become poorer. He said Russia was a "global player" and wished to "participate in forming new rules of the game", but not because of "imperial ambitions".

PETROL HIKE 40% TO COST RM2.70 A LITRE FROM MIDNIGHT TONIGHT

Although the petrol price went up 78 sen a litre, a hike of 40% but is still the cheapest in Asia.

Prime Minister Datuk Seri Abdullah Ahmad Badawi on Wednesday announced that the new price for premium leaded petrol (ULG 97) is RM2.70 per litre went up by 78 sen, the price for ULG 92 petrol per litre went up by 74 sen to RM2.62. effective midnight tonight.

The price went up by 78 sen from the current RM1.92, a hike of 40%. The price of diesel increased by RM1 from RM1.58 to RM2.58.

The 78 sen hike or 40 per cent increase for the ULG 97 petrol is still below the anticipated RM4 per litre price projected earlier and is still the cheapest in Asia.

IS PETROL TO BE SOLD AT RM4 A LITRE?

The price of oil hit a new high of US$135 (RM434) a barrel. If petrol is to be sold at full market prices, it could be as high as almost RM4 a litre - about 100 percent above current levels. Currently petrol sells for about RM1.92 a litre, among the cheapest in the region.

Looking from macro aspect, with increased globalization and closer socio-economic ties between countries, the devastating economic effect of the hike in fuel prices is far more destructive. The damages done can threaten not just a single country, but can impact an entire region.

The devastating economic crisis may ripple affects through the global economy especially economic growth. The situation may become critical arise questions about the economic effects of this and other terrible problems face by the world and Malaysia.

As an oil and gas exporter, Malaysia has profited from higher world energy prices, but due to the price hike, petrol, diesel and gas prices in Malaysia will be at an all-time high and rising from now too.

Given the rising trend in the price of crude oil, a political decision could not be put off. The much-discussed hike in fuel prices which forced government to reduce subsidies is by far needed and around the corner.

The move to cut the spiraling bill for its extensive subsidies, which is expected to cost RM56 billion this year. Although experts and politicians have a lot of excellent reasons to explain the price hike, among them blaming mysterious international market forces for increases in oil prices, unrest in the Middle East, petrol-guzzling cars, greed among oil-producing nations and the fall in the value of the US dollar.

Prime Minister Datuk Seri Abdullah Ahmad Badawi said, the international community should look at the possibility of suspending the trading of oil in the futures market to prevent speculative bidding of the commodity. Countries like Japan had taken the lead in instituting such a move for other commodities.

“To prevent speculative biddings, Japan has suspended trading of rice in the futures market. It has also offered to sell rice from its stockpile at reduced prices,” he said in his keynote address at the 22nd Asia Pacific round table here yesterday.

Abdullah said the international community should examine if similar steps could be applied to the trading of crude oil as it was a major contributor to inflation. He, however, recognized that his proposal would require negotiation and agreement at the international level.

Abdullah said the steep rise in oil, food and other commodities required a global response.

Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said, the new subsidies would be a needs-based system, rather than the current arrangement which lowers the cost of petrol for all users no matter what their income.

The government was considering mechanisms including offering cash payments or setting quotas. The government is initially targeting Singaporeans and Thais who make day-trips across the border to fill their tanks with fuel that is substantially cheaper here.

How about the public transport? Should the accessibility, efficiency and facilities in the public transport system be improved?

Malaysia is far too dependent on oil and it is only going to get more and more expensive. Should we be encouraging our people to reduce their energy consumption? Shouldn't we plan to remove our dependency?

The degree of dependency on oil should be reduced now. We should heading it off by proper planning and look at long-term solutions through alternative sources of energy like solar power, biodiesel and wind farms. We must look for real alternatives now to replace oil not till when it has all run out.

OIL PRICES LIKELY GO HIGHER

Oil prices reached a new high Friday at $117 a barrel. It would likely go higher, higher and higher………………

ROME - OPEC Secretary-General Abdullah el al-Badri said Sunday oil prices would likely go higher and that the group was ready to raise production if the price pressure was due to a shortage of supply -- something he doubted.

"Oil prices, there is a common understanding that has nothing to do with supply and demand," al-Badri said on the sidelines of an energy conference in Rome.

A host of supply and demand concerns in the US and abroad, along with the dollar’s weakness, has served to support prices, even as record retail gasoline prices in the US appear to be dampening demand. Crude prices have risen as much as 4 percent last week.

The OPEC chief said the Organization for Petroleum Exporting Countries "will not hesitate" to increase production if the group thought the higher prices were due to shortages. But he said more oil will not solve the high prices.

OPEC's production levels were just one of many factors, he said.

"But how much higher it will go, of course it depends on a number of things: the political situation, whether there is a natural catastrophe, whether there are speculations in the market, whether there are strikes in certain producing countries. So there are many other factors other than OPEC production," al-Badri said..

OIL HITS ANOTHER RECORD HIGH

Petronas profit rises again and the government subsidy needs to increase if no price hike. The real question remains: How much the petrol price hike after the 12th General Election?

The gravity-defying price of oil shot through another barrier March 3, 2008 by briefly touching $103.95 a barrel in New York trading, the highest cost ever for black gold even after adjusting for inflation.

Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said the 13-nation cartel is shying away from boosting production because of the U.S. economic slowdown, political turmoil in the Middle East and expectations of slackening global demand for crude.

Oil will surpass $100 a barrel ?

Oil prices — which zipped past $96 per barrel Thursday — would need to surpass $100 a barrel and remain at that level for at least two weeks or more to inflict widespread and lasting economic damage, says Tyson Slocum, director of the energy program at consumer group Public Citizen in Washington.

Fortunately, the consensus view on Wall Street is chances are slim that oil will surpass $100 a barrel and stick for any length of time.

A severe housing slump and attention-getting credit crunch are tapering U.S. economic growth, which will trim energy demand and bring prices down to around $70 to $80 a barrel, predicts Fimat analyst Antoine Halff.

All bets are off if tensions between the U.S. and Iran escalate, he adds.

But even a snapshot of today's prices compared with prices at the same time a year ago is psychologically alarming.

Crude oil prices hit a record overnight Thursday after the U.S. reported a surprisingly large drop in inventories. Light, sweet crude for December delivery fell $1.04 to settle at $93.49 a barrel on the New York Mercantile Exchange after rising as high as $96.24, a new trading high, overnight. That compares with $58.71 a barrel on the same day last year.

However, looking beyond the day's headlines is revealing and comforting — from an economic perspective. The average per-barrel price of crude on the New York Mercantile Exchange through Oct. 30 was $68.22, compared with $67.34 over the same period in 2006, according to Energy Department data.

The increase is slightly more pronounced at the pump. Regular gasoline has averaged $2.75 per gallon (73 cents a liter) through the first ten months of the year, compared with an average of $2.67 a gallon (70 cents a liter) over the same period last year.

Consumers are changing their behavior in response to higher prices at the pump. Sales of hybrid vehicles and energy-efficient compact cars are expected to set records this year, while sales of gas-guzzling pickup trucks and SUVs have declined.

Jason Shogren, a professor of economics at the University of Wyoming, said the U.S. economy has held steady when oil prices increased in recent years because the price changes were gradual. But even price spikes, like what has been seen in the crude oil market in recent weeks, isn't enough to convince Americans to cut back on their driving.

The average daily demand for gasoline is up slightly so far this year at 9.3 million barrels compared with 9.2 million barrels a day through October 2006, according to government data.

China increases fuel price by 8% from Nov. 1, 2007

China raised gasoline and diesel prices by 8 percent Thursday amid fuel shortages that oil companies blame on a lack of refining capacity due to price controls.

The National Development and Reform Commission (NDRC), the country's top economic planner, announced Wednesday night that the prices of gasoline, diesel oil and aviation kerosene would be raised by 500 yuan ($68) per ton.

That translates into motorists paying 0.4 yuan or 0.46 yuan more per litre of gasoline or diesel.

The change was made to narrow the gap between soaring crude oil prices and state-set retail prices, the country's main planning agency, the National Development and Reform Commission, said in a statement.

"To ensure the supply of domestic oil products and the promotion of energy conservation, the state decided to properly increase the prices of oil products," the NDRC said. It said the price rise also would apply to aviation fuel.

Shortages of diesel and gasoline have led to rationing over the past week, causing long lines at filling stations and disrupting trucking in key export areas.

Some customers and Chinese media accused oil companies of creating phony shortages to force Beijing to raise prices.

On Wednesday, a man was killed in a fight after he tried to cut in line for gas in the central province of Henan, according to police.

Crude Oil As A Political Weapon

Soaring fuel price five fold causing the crackdown triggered anti-government protests led by Buddhist monks in Myanmar and President Bush says it’s time for American to end its addiction to oil, have shown clearly that the fuel producing nations appear to be ready to use oil as a political weapon and the seriousness key problem of the world.

Soaring energy spiraling out of control pushed oil country tubular goods prices up. Arguably, higher energy prices are unavoidable, and are needed to bring about the shift to conservation, higher efficiency and replacing by alternative energies. However, the sharp increase in oil prices over those years causes very serious immediate negative effects, not only for businesses with high production cost, but for low income families too.

People can take the bus or drive less in response to higher gas prices. It is interesting to note that household spending on private transportation tends to rise as a percentage of total spending as income increases, while spending on household energy costs tends to fall, and low-income households tend to rely more on public transit as well as household energy.

No one knows exactly what will happen to the consequences but fuel oil and natural gas prices are non stop soaring. Let's not forget that higher energy prices have already pushed the inflation rate to close to 5% causing the cost of factories and transportation increases.

The fundamental problem that some believe causes the large jump in price to rise are the remaining fuel will be more difficult to extract technically and therefore more expensive. The political turmoil and other reasons of instability in the countries of discovery are believed contribute to soaring energy price up.

Most of all, it is the oil speculation extending into the long term on the oil market is strongly believed the root causes of the soaring price up. Speculators foresee increasing demand, decreasing supply, leading to a long term increase in the price of oil.

The American with only about 5% of the total world population and 28% of global GDP in 2006 consumes about 25% of the world’s total oil production and 40% of the world’s gasoline production.

Initially, the world enjoyed cheap fuel. Cruel oil prices rose from US $2.50 in 1948 to $3.00 per barrel in 1957 and stable till 1970. But in real terms the price declined from above US $17 to below $14 per barrel is due to the weakness of the USD.

In 1972 the price of crude oil was about $3.00 per barrel but by the end of 1974, the price quadrupled to over $12.00. It is due to Yom Kippur War where Syria and Egypt attack Israel on October 5, 1973. The American and Western countries supported Israel caused some Arab exporting countries imposed embargo on them. Arab curtailed production by 5 million barrels per day represented 7% of the free world production.

From 1974 to 1978 world cruel oil prices were between $12.21 per barrel to $13.55 per barrel. During November 1978 to June 1979, the Iranian revolution resulted in the loss of 2 to 2.5 million barrels per day. When Iran invaded by Iraq in September 1980 caused the production of both countries maintain at a million a day, which is lessen by 6.5 million barrels per day. Thus both Iranian revolution and Iraq-Iran war caused cruel oil prices increased from $14 in 1978 to $35 per barrel in 1981.

OPEC was formed in 1960 but has never been effective at controlling prices. As a cartel, OPEC does not even have enforcement mechanism. From 1982 to 1985, OPEC attempted to set production quotas low enough to stabilize prices but failed as various members produced beyond their quotas. The price was below $18 by 1987.

The price spiked in 1990 with lower production but recover when Russian reduce in production and economic booming of US and Asian Pacific region. From 1997 to 1998 the Asia economic crisis and consumption declined, but in early 1999 price move above $25 per barrel.

The loss production in Iraq and Venezuela with OPEC increase production can not overcome the interruption supply from OPEC producers, in which a million barrels per day is not enough as a spare capacity.

The increase world consumption to over 80 million per day in 2005 causes the price to soar to $50 per barrel. By August 11, 2005, the price had risen to over $60 per barrel, over $80 and reached record high of $83.93 on September 2007.

Various factors attributed to this dramatic increased, including North Korea’s missile launch, Israel and Lebanon crisis, Iranian nuclear, reports of declining cruel oil reserve and emerging of China and India in increasing consumption of cruel oil.

Continuing soaring energy creates very serious immediate difficulties, not just for businesses with high energy costs, but also for low income households. It pushed tubular goods and cost of production up, consumer cries for cuts in fuel is understandably become more insistent. Businesses and families will have to make adjustment to this no end increasing trend. To search for the ways to diversify energy using is by far needed. Alternative energies like biofuels, solar, winds, nuclear power and others need to be developed and utilized like never before. Most importantly, the fuel producing nations appear to be ready to use oil as a political weapon needs to be addressed.