The oil price at the international market has kept on rising recently. On May 7, the price of crude oil to be delivered in June once rose to USD 40.05 per barrel at the Comex. Even though the price fell to USD 39.93 per barrel at the close of the market, it was still the highest price in the past 13 years. The price of gas futures at the Comex rose by 2.7 percent too, reaching USD 1.34 per gallon, the highest price ever since Dec 1984.

The hiking oil price can be attributed to various reasons. First, the demand for oil increases round the world. With the revival of the global economy, the demand for oil is on an obvious increase. As the International Energy Agency's forecast indicates, the world will need 1.65 million barrels of oil daily in 2004. The daily oil demand in the world will be 79.9 million barrels. The U.S. Department of Energy also predicts a rise of over 2 percent in oil demands during the period of 2004 to 2005.

Secondly, the crude oil stock decreases. By the end of January 2004, the commercial oil stock in western countries dropped to 2.49 bln barrels, equal to the consumption for 51 days. And the US commercial oil stock declined to the lowest point since 1975. The International Energy Agency therefore issued a warning: the decline of oil stock brought about oil shortage in market and more dangers of capricious price.

Thirdly, the OPEC restricts the oil output in order to protect oil price. OPEC has reduced oil output twice during the past half a year. On Sept 2, 2003, it decided to cut back oil production by 900, 000 barrels per day. Though the decision was not completely executed, it had given rise to the oil price in the international market. As from April 1 2004, it cut the oil output by 1 million barrel every day and demanded the member countries to put a stop to the crude oil production beyond the quota.

Fourthly, The speculation at the international oil market exerts more pressures on the oil price. The speculation is usually the "invisible hand" that controls the rise and fall of the oil price. Enormous hot money in the international market is buying and selling speculatively to gain huge profit. The trade volume of futures is several times larger than that of the spot transaction. At crude oil future market, 70 percent of the transactions are arbitrage, while only 30 percent is for actual needs. In addition, geopolitics is imposing more influences upon oil price. The turmoil in the Middle East and terrorist activities also made the oil price even higher.

What is the oil price trend in the future? The latest forecast says the high oil price will probably remain unchanged until the coming autumn. The target price of the oil will likely increase from somewhere between USD 22 and 28 to 32 and 34, remarks Purnomo Yusgiantoro, General Secretary of the OPEC and Minister of Energy and Mineral Resources, Indonesia. As predicted by experts, there is no much room for the oil price to decline in general. The low oil price in the olden days will be unlike to reappear.

The high oil price effects great negative influence for the revival of global economy. Not long ago, the meeting of seven western countries' finance ministers and central bank governors indicates that high oil price has become a secret worry for the development of global economy. As shown in price of oil and natural gas, the price of energy will not fall. This will influence enterprise decision for investment, says Greenspan, Chairman of the US Federal Reserve. He warned on Apr 28 that the "dramatic' rise of oil and gas futures was an economic event that can significantly affect the long-term growth of the US economy". The world economy will lose a percentage point, or a loss of USD 300 bln in GDP, if the oil price rises by USD 15 in one year, estimates the International Monetary Fund. The figure is probably underestimated, for the soar of oil price will seriously make consumers and enterprises lose confidence and affect consumption and investment. The indirect loss is hard to estimate, remarks the chief economist of the organization.

Should the oil price still remain high in the weeks to come, the non-formal ministerial level meeting of OPEC to be held at the end of the month will probably consider increasing the oil output so that the rise of oil price can be checked and more negative effects on the global economy can be avoided.

Source: People's Daily Online