It did not take long for the price of oil to reach $100 a barrel in 2008. Rising demand, geopolitical instability and a falling dollar have all contributed to the soaring price of crude. None of these factors is likely to diminish: High prices are here to stay.
After flirting with the $100 mark in the late half of 2007, oil prices crossed that threshold last Wednesday in New York and again Thursday. Crude prices have climbed steadily for six years and are now five times the 2002 level, when they were just $20 a barrel. Last year alone, oil prices surged 60 percent. Adjusted for inflation, prices today are at or near those of the early 1980s when markets were rattled by the Iranian revolution and the outbreak of the Iran-Iraq war.
Geopolitics is equally messy today. Both Iraq and Nigeria, major exporters, are restive, and traders are unsettled by developments in Pakistan and Iran. Rising tensions in the Middle East and the Persian Gulf generally have also added to upward pressure on prices. Concern about the U.S. economy, and the falling value of the dollar, has prompted investors to look for hedges. This too pushes up the price of oil.