Why oil prices are at a record high

Crude oil hit a record high of $78.77 a barrel on Wednesday after a larger-than-expected drop in crude inventories in the United States, the world’s top fuel consumer.

Real and threatened disruptions to crude oil supplies, constraints at refineries in consuming countries, resilient global fuel demand and a flow of investor money into oil and other commodities have pushed prices higher.
DEMAND

While previous price spikes have been triggered by supply disruptions, demand from nations such as China and the United States is a main driver of the current rally.

Global demand growth has slowed after a surge in 2004, but it is still rising and higher prices have so far had a very limited effect on economic growth.

Analysts say the world is coping well with high nominal prices because adjusted for exchange rates and inflation, they are lower than during previous price spikes and some economies have become less energy intensive.

Reuters