3-digit oil price is here to stay

Just a few days into the New Year and crude oil prices hit $100 a barrel, breaking the psychological barrier and setting the scene for more records before the end of this year. It is a new era for oil prices and let us look back at the two-digit oil prices era. It took nearly 147 years for oil prices to break the two-digit barrier of $10 a barrel since the first barrel of oil was first discovered in 1861 in the state of Pennsylvania in USA. This time around, the $100 record was achieved in style. Three interrelated factors simultaneously pushed the prices upward to reach the historical record. The trouble in Nigeria and concerns about shortage or reduction of crude oil supply to Europe, coupled with lower commercial inventory levels for crude oils and finished products in USA and the continued weakening of US dollar together helped the crude oil prices to reach $100 a barrel.


Speculators are having a good time by trying to maximize their gains and simultaneously trying to push prices beyond the 100 mark, even if by a few cents, to manipulate the oil market. They will play this game for a long time. In the meantime, financial houses and the paper oil trading companies will begin to make predictions about oil prices reaching $120 in the future and all of us will be just sitting and watching in disbelief. Today, the oil producing countries cannot reduce the prices. The hope is only on the consuming countries. They should curb their demand and reduce their gasoline consumptions, especially in the USA where consumption levels are so high that people reduced spending on other items in order to save their money for gasoline. Such trends adversely affect the economy and shrink economic activity. Oil prices may reduce a little during the next few months as the real demand for oil diminishes for a while during this time of the year and we hope China and India