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Energy Costs Will Continue to Rise - Why Global Demand Will Keep Fuel Prices High

As reported by the Energy Information Administration (EIA), the daily global consumption of crude oil has risen by 22 percent in the past 16 years, and the price of crude has increased nearly eightfold in the same period.  Gasoline demand in the same period jumped approximately 44 percent – as the traded futures price of gasoline increased six times.  Clearly, the amount by which the price has risen seems to have exceeded the degree by which demand has grown.

There are several reasons why the fuel prices will continue to rise.

First, one of the reason for prices remaining high is the upward pressure for gasoline during its peak demand season. Apparently, gasoline supplies in the United States is inadequate to get through the peak season, as indicated by the continuous falling gasoline inventory. This summer America's gasoline demand continued to increase at such a speed that the existing refining capacity found it hard for supply to keep pace with demand. Even though the peak driving season is now behind us, with the peak heating fuel season approaching, the market may continue to experience upward product price pressures.

Second, the oil market is a global one, and America is not the only large consumer. With countries like China and India consuming an increasing amount of oil, global demand for oil is rising faster than global supply. As a result, oil prices are rising throughout the world, which leads to higher gas prices in America.

Third, the ongoing battles and volatility in Iraq have a tremendous impact on the oil market. Furthermore, the loss of production in Iraq is an unsettling example of the disruption a small group of guerrillas can create. It sparks global fears that the same type of disruption could happen to Saudi Arabia or Russia. For a market already facing a tight fuel supply, that would represent a huge challenge and strain.

To solve the problem, we must undergo a rapid change in our daily fuel consumption. It is imperative that we begin thinking about today's energy conservation choices and try ways to save energy. Not only can you lower your energy bills, but you will also help protect the earth's environment.

   
   
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