2004 To 2008: Rising Costs of Oil
After retreating for several months in late 2004 and early 2005, crude oil prices rose to new highs in March 2005. The price on NYMEX has been above the $50 per barrel since March 5, 2005. In June 2005, crude oil prices broke the psychological barrier of $60 per barrel. After the destruction of Hurricane Katrina in the United States, gasoline prices reached a record high during the first week of September 2005. The average retail price was, on average, $3.04 per U.S. gallon. The average retail price of a liter of petrol in the United Kingdom was 86.4p on October 19, 2006, or $6.13 per gallon. Oil production in Iraq continued to decline as result of the nation's ongoing conflict causing a decrease in production to 1 million barrels per day (160,000 m3/d).
In mid-2006, crude oil was traded for over USD 79 per barrel (bbl), setting an all-time record. The run-up is attributed to a 1.9 increase in gasoline consumption, geopolitical tensions resulting from North Korea's missile launch. The ongoing Iraq war, as well as Israel and Lebanon going to war are also causative factors. The higher price of oil substantially cut growth of world oil demand in 2006, including a reduction in oil demand of the OECD. After news of North Korea's successful nuclear test on October 9, 2006, oil prices rose past $60 a barrel, but fell back the next day.
On October 19, 2007, U.S. light crude rose to $90.02 per barrel due to a combination of ongoing tensions in eastern Turkey and the reducing strength of the U.S. dollar. Prices fell briefly on the expectation of increased U.S. crude oil stocks, however they quickly rose to a peak of $92.22 on October 26, 2007.
On January 2, 2008, U.S. light crude surpassed $100 per barrel before falling to $99.69 due to tensions on New Years Day in Nigeria, and on suspicion that U.S. crude stocks will have dropped for the seventh consecutive week. A BBC report from the following day stated a single trader bid up the price; Stephen Schork, a former floor trader on the New York Mercantile Exchange and the editor of an oil market newsletter, said one floor trader bought 1,000 barrels (160 m3), the smallest amount permitted, and immediately sold it for $99.40 at a $600 loss. Oil fell back later in the week to $97.91 at the close of trading on Friday, January 4, in part due to a weak jobs report that showed unemployment had risen.
On March 5, 2008, OPEC accused the United States of economic "mismanagement" that was pushing oil prices to record highs, rebuffing calls to boost output and laying blame at the George W. Bush administration. Oil prices surged above $110 to a new inflation-adjusted record on March 12, 2008 before settling at $109.92. On April 18, 2008 the price of oil broke $117 per barrel after a Nigerian militant group claimed an attack on an oil pipeline. Oil prices rose to a new high of $119.90 a barrel on April 22, 2008, before dipping and then rising $3 on April 25, 2008 to $119.10 on the New York Mercantile Exchange after a news report that a ship contracted by the U.S. Military Sealift Command fired at an Iranian boat.
On June 6, prices rose $11 in 24 hours, the largest gain in history due to the possibility of an Israeli attack on Iran. The combination of two major oil suppliers reducing supply generated fears of a repeat of the 1973 oil crisis. The mid-July decision of Saudi Arabia to increase oil output caused little significant influence on prices. According to the oil minister of the Islamic Republic of Iran, Gholam-Hossein Nozari, the world markets were saturated and a Saudi promise of increased production would not lower prices. Several Asian refineries were refusing Saudi petroleum in late June because they were over priced grade.
On July 3, "the Brent North Sea crude contract for August delivery rose to $US145.01 a barrel" in Asian trade. London Brent crude reached a record of $145.75 a barrel, and Brent crude for August delivery peaked to a record $145.11 a barrel on London's ICE Futures Europe exchange, and to $144.44 a barrel on the NYMExchange. By midday in Europe, crude rose to $145.85 a barrel on the NYME while Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange.
Read more about this topic: World Oil Market Chronology From 2003
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