The latest spike in prices followed two deadly attacks on foreign oil workers in Saudi Arabia. In the first attack, on May 1, six people, all Westerners, died at the Yanbu, Saudi Arabia refinery. A month later, during the Memorial Day weekend, 22 were killed at a foreign workers' compound in Khobar, Saudi Arabia. The attacks heightened concerns that the Saudis -- the world's largest oil exporters -- would not be able to contain extremist violence and maintain the oil flow, but since then the nation's oil minister confidently promised an extra 700,000 to 800,000 barrels a day. High production, higher demand: "There is a good supply of oil, but summer travel plus increased demand from the U.S. and China as our economies pick up have helped drive prices up," says Loren Czarapata, an international cost-of-living expert who is director of client relations for Runzheimer International, a Wisconsin-based management consulting firm.
"Although gas prices have risen, you have to consider that a 20-cent-per-gallon rise for a vehicle that gets 20 miles to the gallon translates into a rise of only a penny a mile," explains Czarapata. "It looks bad, but it shouldn't stop anyone taking a trip. It mostly hurts airlines or service businesses with fixed fuel needs." | Location | Cost per gallon (in U.S. dollars) | | London | $7.03 | | Middlesbrough, England | $5.49 | | Hong Kong | $5.62 | | Frankfurt, Germany | $5.30 | | Stavanger, Norway | $5.23 | | Copenhagen, Denmark | $5.18 | | Oslo, Norway | $5.08 | | Rome | $4.88 | | Lisbon, Portugal | $4.81 | | Geneva | $4.72 | | Seoul, Korea | $4.67 | | Vienna, Austria | $4.51 | | Istanbul, Turkey | $4.48 | | Zagreb, Croatia | $4.45 | | Tokyo | $3.88 | | Sydney, Australia | $2.57 | | Vancouver, Canada | $2.44 | | Calgary, Canada | $2.07 | | Taipei, Taiwan | $2.43 | | Tblisi, Georgia | $2.39 | | Mexico City | $2.31 | | Vientiane, Laos | $1.66 | | Bangkok, Thailand | $1.56 | | Shanghai, China | $1.47 | | Moscow | $1.43 | | Baku, Azerbaijan | $1.15 | | Caracas, Venezuela | $0.14 | | Baghdad, Iraq | $0.05 | |
The Organization of Petroleum Exporting Countries, a cartel of 11 Middle Eastern oil-producing nations, turns an oil faucet on and off to keep world oil prices steady, explains Baran. "They don't want to put out so much that prices collapse, or so little at high prices that buyers look elsewhere. "They created an official ceiling of 23.5 million barrels of crude a day, but have been pumping above that limit to stabilize world economies and provide an ample oil supply." On June 3, OPEC ministers lifted the official output limits by two million barrels a day and the 11-nation cartel also agreed to release another 500,000 barrels a day after August 1. Experts say oil discoveries have been running well ahead of actual extraction levels for 20 years and oil production has not yet peaked, but probably will by 2020. Pessimists feel that potential demand will run ahead of actual supply within three years. Optimists say that technology will find solutions. It's worth noting that fuel economy in the United States for cars, light trucks and SUVs has improved 6 percent since 1987, while the average vehicle weight is up 26 percent and horsepower has climbed 76 percent. If weight and horsepower had remained the same, the average car would now use 58 percent less fuel, not just 6 percent less. Why do drivers in some states pay more than in others? Runzheimer's Czarapata says: "States like California or Wisconsin have environmental requirements that make fuel more expensive." States distant from the Gulf Coast, the source of nearly half the gas produced in the United States, also pay more to transport gasoline, as do states far from refineries. Disruptions in supply -- caused by refinery maintenance or unexpected repairs, for example -- can prompt bidding wars for available fuel. Gas stations' operating costs can drive up prices (it's more expensive to have a station in a city center) and lack of local market competition can also boost the price at the pump. "On top of all that, President Bush has been buying up gasoline for homeland inventory, too," points out Czarapata. "That too has added pressure to prices." So what's in the future?
"People have been saying for decades that we're about to run out of oil," says Czarapata. "In fact, we have supplies for the foreseeable future and we are steadily developing hydrogen-powered and hybrid vehicles. Until now, the numbers have not been significant and the Saudis have been able to tip the balance back to petroleum-fueled vehicles.
"When enough alternative energy vehicles are on the roads and we no longer need oil in the same way, the Saudis will have lost their little game and we will not be dependent on Mideast oil." Paul Bannister is a freelance writer based in Oregon. |