Friday, July 29, 2005

The Oil Crisis Of 2005

By David M. Fine

This summer Gas prices have hit record highs, costing as much as two dollars and forty cents per gallon on the West coast.

When you look at what gasoline has cost per gallon since World War II, adjusted for inflation, it appears that it's the most expensive today that it has ever been, excepting the oil crisis of the 70s and 80s.

Will prices come down? The American Petroleum Institue (API) noted in its recent report to Congress an Energy Information Administration (EIA) estimate that gas prices should hover around $2.30 through 2006.

However, a new July 27th report by EIA suggests that growth in oil demand in China and the U.S. will slow: "Given recent reports issued by oil consulting companies that have revised 2005 Chinese demand growth down markedly, some oil analysts seemingly have surmised that...downward pressure on oil prices may be imminent."

A June CNN.com story quoted Andy Xie, Chief Economist for Morgan Stanley in Asia, who blamed the spike in oil prices on speculation in the markets. "The financial sector may have become dependent on the trading profits from oil. As evidence accumulates over weakening demand and strong supply, I believe oil prices could collapse," Xie told CNN.

Good news for Hummer and SUV drivers.

[This article will be updated]

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Related Links

Energy Information Administration